Output is projected to decline in the near term, resulting in annual growth of 2.9% this year, -0.6% in 2023 and 1.9% in 2024. High inflation, rising mortgage interest rates and falling asset prices will erode household purchasing power, holding back private consumption. Unemployment will increase and inflation is expected to recede gradually and close in on the 2% inflation target in the latter half of 2024.
©Shutterstock/KarabinRead full country note
Resolute policy action to protect households and businesses has mitigated the pandemic’s toll on the Swedish economy, which nevertheless contracted sharply in 2020. Growth is picking up on the back of strong manufacturing activity and exports, while vaccination brings hope for a gradual return to normality in sectors requiring face‑to‑face interaction. Nevertheless, fiscal support and accommodative monetary policy will remain necessary until the recovery is well established. Government measures to expand education and training and to enhance job matching, along with the implementation of the labour market reforms agreed by the social partners, will help employment recover, particularly among the most vulnerable groups, which have been worst hit by the pandemic. Fostering inclusive growth throughout Sweden will require upgrading the sub‑national government fiscal framework, enhancing public service efficiency, especially through digitalisation, and promoting regional convergence further, especially by strengthening the role of universities in regional knowledge and innovation networks.
While Sweden is a country with low inequality, the COVID-19 crisis is exacerbating difficulties for some and risks scarring youth working prospects. Inequality in educational outcomes risks widening further, as students from disadvantaged social backgrounds may face greater difficulties to adapt to distance learning. These are top priorities for a more resilient and equitable recovery.
©Shutterstock/Anton PetrusRead full country note
2021 Structural Reform Priorities