Swedish economy expected to pick up again 'late this year'
Sweden's period of low growth will be relatively short and the economy will pick up late this year or early next year, according to a new report by the Swedish National Institute of Economic Research (KI).
Previously, KI, a government agency operating under the country's finance ministry, had predicted that Sweden's period of low growth could extend throughout 2025 with things only beginning to improve in 2026.
Now, however, the institute believes that things could start getting better as early as the end of 2024.
"Well, we do think that the Swedish economy will be growing again from late this year," KI's head of forecasting, Ylva Hedén Westerdahl, told The Local.
"We have negative quarters now. And so a slight uptick late this year, beginning of next year, but this is all uncertain."
She added, however, that the "quite strong" GDP figures reported the first quarter of this year might not be as strong as they seemed, as they were mainly driven by well-stocked inventories.
Labour market unexpectedly strong
The most important reason that the forecast for the coming year is better than expected is the unexpectedly strong labour market in Sweden, with no noticeable increase in unemployment.
"What is a bit of a conundrum is that the labour market is holding up in this downturn in the economy, so that the unemployment rate has not ticked up. We see an upturn in employment, and it's not until late this year that we expect to see a slight downturn in employment."
"So it's a bit unusual the two patterns," she told The Local. "In the sense that it's mostly a downturn within companies rather than in the labour market."
Could be possible to lower interest rates in early 2024
If KI's prognosis is correct, Hedén Westerdahl added, it might be possible for the Riksbank to start lowering interest rates from the beginning of 2024.
"Our forecast and [the Riksbank's] forecast are quite different," she said. "So their forecast is that it's going to be at this level or slightly higher for the whole of next year. We think that maybe the Riksbank actually can start lowering the interest rate by the beginning of next year."
"In our forecast, the inflation rate is coming down, we see an uptick in unemployment, so I would say there is still great uncertainty about this, but that's our view."
The institute does, however, expect the Riksbank to further increase the key interest rate next week, from the current 3.5 percent to 3.75 percent.
By Paul O'Mahony and Becky Waterton. Listen to our interview with Ylva Hedén Westerdahl in the next episode of The Local's Sweden in Focus podcast, out this Saturday.
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Previously, KI, a government agency operating under the country's finance ministry, had predicted that Sweden's period of low growth could extend throughout 2025 with things only beginning to improve in 2026.
Now, however, the institute believes that things could start getting better as early as the end of 2024.
"Well, we do think that the Swedish economy will be growing again from late this year," KI's head of forecasting, Ylva Hedén Westerdahl, told The Local.
"We have negative quarters now. And so a slight uptick late this year, beginning of next year, but this is all uncertain."
She added, however, that the "quite strong" GDP figures reported the first quarter of this year might not be as strong as they seemed, as they were mainly driven by well-stocked inventories.
Labour market unexpectedly strong
The most important reason that the forecast for the coming year is better than expected is the unexpectedly strong labour market in Sweden, with no noticeable increase in unemployment.
"What is a bit of a conundrum is that the labour market is holding up in this downturn in the economy, so that the unemployment rate has not ticked up. We see an upturn in employment, and it's not until late this year that we expect to see a slight downturn in employment."
"So it's a bit unusual the two patterns," she told The Local. "In the sense that it's mostly a downturn within companies rather than in the labour market."
Could be possible to lower interest rates in early 2024
If KI's prognosis is correct, Hedén Westerdahl added, it might be possible for the Riksbank to start lowering interest rates from the beginning of 2024.
"Our forecast and [the Riksbank's] forecast are quite different," she said. "So their forecast is that it's going to be at this level or slightly higher for the whole of next year. We think that maybe the Riksbank actually can start lowering the interest rate by the beginning of next year."
"In our forecast, the inflation rate is coming down, we see an uptick in unemployment, so I would say there is still great uncertainty about this, but that's our view."
The institute does, however, expect the Riksbank to further increase the key interest rate next week, from the current 3.5 percent to 3.75 percent.
By Paul O'Mahony and Becky Waterton. Listen to our interview with Ylva Hedén Westerdahl in the next episode of The Local's Sweden in Focus podcast, out this Saturday.
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