Sweden Cuts GDP Growth Forecasts, Sees Downside Risks

Sweden Downgrades Economic Growth Forecast Amid Global Trade Tensions

STOCKHOLM (Reuters) – Sweden has revised its economic growth forecast for the next two years, lowering expectations due to rising global trade tensions and increased uncertainty about the future. The government now predicts a 1.8% GDP growth for this year and 2.3% in 2026, down from previous forecasts of 2.1% and 2.8%, respectively.

Sweden’s Finance Minister, Elisabeth Svantesson, shared the updated forecast on Friday, acknowledging the challenges ahead. Earlier predictions, made in April, were already expected to be adjusted, as the global economic landscape has shifted dramatically.

Global Trade Tensions Weighing Heavily

A major factor behind this revision is the ongoing trade frictions, particularly with the U.S. These tensions, including the unpredictable nature of U.S. tariffs, have sent shockwaves through the markets. The International Monetary Fund (IMF) recently lowered its global growth forecast, with Sweden’s key trading partner, Germany, expected to see zero growth this year, further impacting Sweden’s outlook.

While Sweden’s economy remains in a relatively strong position compared to many other nations, Svantesson cautioned that the situation could worsen. “It is a fairly dark picture that we see,” she said, underscoring the growing risks of further downgrades.

A Plan to Weather the Storm

Despite the gloomy forecast, Sweden is in a strong financial position, with robust government finances providing a buffer against the storm. Svantesson reassured that additional measures to stimulate the economy could be introduced even before the autumn budget if necessary.

She emphasized that Sweden’s expansionary fiscal policies, including last year’s budget and the spring fiscal bill, are designed to support growth. “We believe we are on the right track,” she explained, highlighting the government’s focus on investments that support businesses, improve infrastructure, and lower taxes.

The Road Ahead

In addition to government support, the Swedish central bank has also adopted a cautious stance. While it held its key interest rate steady this week, it signaled that it might take further steps toward easing monetary policy if the situation worsens, with growth slowing and inflation remaining more moderate than expected.

While Sweden is not facing an immediate crisis, the outlook remains uncertain, and the government is prepared to take action to ensure stability as it navigates the challenges ahead.