In 2021, Sweden’s economy recovered from the pandemic, expanding by over 5.1%. However, in the first quarter of 2022 real GDP shrunk by 0.8% and is forecast to broadly stabilise in the second quarter of 2022 before growing modestly in the second half of the year. At the beginning of the year, the surge in inflation reduced household purchasing power as Omicron variant-related restrictions also dampened economic activity while imports increased markedly.
Last update : Summer 2022 Economic Forecast (14/07/2022)
|GDP growth (%, yoy)||-2,2||5,1||1,3||0,8|
|Inflation (%, yoy)||0,7||2,7||6,6||3,6|
The onset of the war in Ukraine aggravated supply bottlenecks and added to price pressures and uncertainty, thus lowering growth. Private consumption growth is expected to remain weak also in 2023 as leveraged households face the double challenge of elevated inflation and rising interest rates, notably for housing loans. This has led to a cooling in the housing market where prices started to fall in the spring. In addition, falling prices of financial assets reduce financial buffers built up during the pandemic. The non-financial business sector is set to be more resilient. Export growth and investment are expected to recover in 2023, mirroring healthy corporate balance sheets and the competitiveness of Swedish exporters. Overall, real GDP growth is set to average 1.3% in 2022 and to fall further to 0.8% in 2023.
In May 2022, HICP inflation went up to 7.5%, a record high since the index was first published in 1996. Price increases were broad-based as rising energy, commodity and freight prices have fed through into consumer prices. However, wage pressures are expected to remain contained. In spite of the surge in inflation, social partners appear to be steering towards moderate central wage agreements in the upcoming collective wage negotiations, having expressed their continued support for using the central bank’s inflation target as guidance. Headline inflation is set to ease in the course of 2023, partly driven by the expected moderation in commodity prices. However, domestic price pressures are set to remain high over the forecast horizon. All in all, HICP inflation is expected to average 6.6% in 2022 and decrease to 3.6% in 2023.
Risks are tilted to the downside for economic growth in view of the vulnerable household sector and global factors. Price increases could become entrenched at relatively high rates due to gradually rising inflation expectations.