New forecast: Swedish GDP to fall by one percent in 2023

The reason is fewer property business investments and less household consumption, Swedish news agency TT quotes from the report.

The SBAB forecast follows another report by the European Commission which predicted that Sweden’s economy will fare the worst out of all EU countries this year.

The downturn is in part intentional: the Swedish Central Bank, the Riksbank, has been hiking the interest rate to slow the economy – and its rampant inflation rate – down.

ANALYSIS:

• For good or ill, Sweden's Riksbank seems set on beating inflation

SBAB argues that the Riksbank should lower the rate towards the end of 2023, as soon as inflation in Sweden moves closer to the bank’s stated two-percent target.

“It is, of course, a difficult balancing act in an, initially, ongoing situation of high inflation, but there are many indications that the Riksbank will still have to place more weight on the increasingly poor real economic development and Sweden’s increasing unemployment, and less weight on what the European Central Bank decides ahead of future interest rate decisions,” said SBAB chief economist Robert Boije.

READER INSIGHTS:

• ‘I’m holding out for some relief’: High interest rates hit foreigners in Sweden