Swedish households are lifting the national economy through increased consumption, according to new economic forecasts. Chief economist Robert Boije noted that stronger household spending is driving growth this year, with public consumption providing additional support next year.
The economic outlook shows gradual improvement in both years. The revised GDP forecast predicts modest recovery at 1.2 percent for next year, up from the previous projection of 1.0 percent. Economic analysts expect slightly better momentum the following year, raising the growth forecast to 2.6 percent from 2.5 percent.
Despite these positive signs, the labor market remains challenging. Unemployment is expected to peak this year at 8.7 percent before declining marginally to 8.4 percent the following year. This persistent unemployment rate suggests the recovery will not immediately translate into widespread job creation.
The inflation forecast has been revised downward, partly due to the temporary halving of food VAT. Core inflation, which excludes mortgage interest effects, is projected to drop from 2.7 percent this year to 1.4 percent the following year. This decline in inflation provides some relief to households struggling with high living costs.
Economic analysts have factored in the planned restoration of the full food VAT rate in 2027, which they expect will push core inflation up to 1.9 percent. This planned tax increase represents a future challenge for household budgets.
The Swedish economic recovery appears fragile despite the positive consumption trends. High unemployment combined with planned tax increases creates uncertainty about sustainable growth. Households are driving the current improvement, but their capacity to continue this support remains uncertain given the labor market conditions.
This economic pattern reflects a common Nordic challenge where consumer spending often leads recoveries while employment lags behind. The situation highlights the delicate balance between fiscal policy measures and their impact on both inflation and economic growth.
International readers should note that Sweden's economy relies heavily on household consumption, similar to other Nordic countries. The current recovery pattern suggests cautious optimism rather than strong, broad-based economic improvement. The coming quarters will reveal whether this consumption-led growth can translate into more substantial economic gains.