PUBLISHED June 28, 2026
According to Sweden’s National Institute of Economic Research (Konjunkturinstitutet) June 2026 Economic Outlook, Sweden’s economy has been in a recovery phase since 2025 and resource utilization continues to rise. While the war in the Middle East is having a dampening effect on the global economy and Sweden’s export markets, domestic demand — particularly household consumption — is providing a strong counterweight, with calendar-adjusted GDP growth of 2.0 percent forecast for 2026 and 2.6 percent for 2027.
The global economy has in recent years been robust. Despite last year’s American tariff increases, world trade has continued to grow, partly due to large AI-related investments especially in the United States. This year, however, global growth is expected to slow somewhat as the closure of the Strait of Hormuz has led to sharply rising prices for a number of important goods, above all energy products. As a result, Sweden’s key trading partners — the KIX countries — are seeing weaker growth in 2026, which is suppressing import demand and keeping Swedish export market growth low. Konjunkturinstitutet assumes that global energy prices will continue to fall, in line with current oil futures markets.
GDP growth during autumn 2026 will be higher when domestic demand grows more rapidly. Household consumption grows strongly during 2026 due to strengthened purchasing power coming primarily from higher wages and tax cuts. Real disposable incomes are rising thanks to relatively high wage growth, tax reductions, and low inflation — a combination that gives Swedish households unusual spending power compared with many European neighbors. Consumer confidence, while still below its historical average, has shown signs of stabilization, and grocery sales have surged since the temporary VAT reduction on food from 12 to 6 percent was introduced in April 2026.
A defining feature of the current Swedish economic cycle is the massive expansion of defence spending. Public consumption increases strongly in 2026, which is primarily due to a large increase in state consumption. The development is primarily driven by the expansion of defence with large purchases of consumables. Investments in infrastructure and the justice system also contribute. Additionally, Sweden is donating military materiel to Ukraine worth several billion kronor per quarter, which counts as disinvestment in the national accounts. Looking ahead, public defence investment will continue to be a key growth driver well into 2027.
In the first quarter of the year, exports increased markedly, above all due to large increases in exports of services and raw materials. In the near term, export development is dampened as some of these increases are assessed as temporary, as well as by the effects of the war in the Middle East. Survey-based order data and other forward-looking indicators suggest relatively good prospects nonetheless, and from 2027 onwards export growth is expected to return to a more normal pace as world trade normalizes.
According to Sweden’s National Institute of Economic Research (Konjunkturinstitutet) June 2026 Economic Outlook, Sweden’s economy has been in a recovery phase since 2025 and resource utilization continues to rise. While the war in the Middle East is having a dampening effect on the global economy and Sweden’s export markets, domestic demand — particularly household consumption — is providing a strong counterweight, with calendar-adjusted GDP growth of 2.0 percent forecast for 2026 and 2.6 percent for 2027.
The global economy has in recent years been robust. Despite last year’s American tariff increases, world trade has continued to grow, partly due to large AI-related investments especially in the United States. This year, however, global growth is expected to slow somewhat as the closure of the Strait of Hormuz has led to sharply rising prices for a number of important goods, above all energy products. As a result, Sweden’s key trading partners — the KIX countries — are seeing weaker growth in 2026, which is suppressing import demand and keeping Swedish export market growth low. Konjunkturinstitutet assumes that global energy prices will continue to fall, in line with current oil futures markets.
GDP growth during autumn 2026 will be higher when domestic demand grows more rapidly. Household consumption grows strongly during 2026 due to strengthened purchasing power coming primarily from higher wages and tax cuts. Real disposable incomes are rising thanks to relatively high wage growth, tax reductions, and low inflation — a combination that gives Swedish households unusual spending power compared with many European neighbors. Consumer confidence, while still below its historical average, has shown signs of stabilization, and grocery sales have surged since the temporary VAT reduction on food from 12 to 6 percent was introduced in April 2026.
A defining feature of the current Swedish economic cycle is the massive expansion of defence spending. Public consumption increases strongly in 2026, which is primarily due to a large increase in state consumption. The development is primarily driven by the expansion of defence with large purchases of consumables. Investments in infrastructure and the justice system also contribute. Additionally, Sweden is donating military materiel to Ukraine worth several billion kronor per quarter, which counts as disinvestment in the national accounts. Looking ahead, public defence investment will continue to be a key growth driver well into 2027.
In the first quarter of the year, exports increased markedly, above all due to large increases in exports of services and raw materials. In the near term, export development is dampened as some of these increases are assessed as temporary, as well as by the effects of the war in the Middle East. Survey-based order data and other forward-looking indicators suggest relatively good prospects nonetheless, and from 2027 onwards export growth is expected to return to a more normal pace as world trade normalizes.
Despite the continued cyclical recovery in the economy, employment increases relatively slowly in the coming quarters. The normal cyclical pattern is that the labour market strengthens more rapidly in the later part of a recovery — and so it will be this time. Demand for labour picks up more during 2027. Unemployment is expected to decline gradually, reaching 7.9 percent by end-2027 — still above the estimated equilibrium rate of 7.2 percent. The employment rate, meanwhile, is rising toward its highest level since the early 1990s.
Fiscal policy has an unusually large impact on inflation this year. In addition to the food VAT reduction, the tax on fuels is also being cut during 2026. The electricity tax was reduced at the start of the year, and dental care subsidies were increased. These measures are holding KPIF inflation below 1 percent for much of autumn 2026 — well below the Riksbank’s 2 percent target. Underlying inflation (adjusted for taxes and subsidies) is running at around 2.3 percent. The Strait of Hormuz disruption is adding upward pressure on energy and industrial input costs, but good harvests and high cereal stocks are keeping food prices in check for now.
At the end of 2026, the Riksbank raises the policy rate from the current 1.75 percent to 2.00 percent. Subsequently the policy rate is raised a further three times during 2027–2028 to 2.75 percent. The increases keep inflation close to the inflation target and stabilize resource utilization after 2027. The rate path is broadly in line with market expectations reflected in RIBA futures contracts. Public finances are deteriorating somewhat in 2026 and 2027, driven by defence outlays and Ukraine support — but the structural deficit (excluding these items) is projected to return to balance by 2030.
Despite the continued cyclical recovery in the economy, employment increases relatively slowly in the coming quarters. The normal cyclical pattern is that the labour market strengthens more rapidly in the later part of a recovery — and so it will be this time. Demand for labour picks up more during 2027. Unemployment is expected to decline gradually, reaching 7.9 percent by end-2027 — still above the estimated equilibrium rate of 7.2 percent. The employment rate, meanwhile, is rising toward its highest level since the early 1990s.
Fiscal policy has an unusually large impact on inflation this year. In addition to the food VAT reduction, the tax on fuels is also being cut during 2026. The electricity tax was reduced at the start of the year, and dental care subsidies were increased. These measures are holding KPIF inflation below 1 percent for much of autumn 2026 — well below the Riksbank’s 2 percent target. Underlying inflation (adjusted for taxes and subsidies) is running at around 2.3 percent. The Strait of Hormuz disruption is adding upward pressure on energy and industrial input costs, but good harvests and high cereal stocks are keeping food prices in check for now.
At the end of 2026, the Riksbank raises the policy rate from the current 1.75 percent to 2.00 percent. Subsequently the policy rate is raised a further three times during 2027–2028 to 2.75 percent. The increases keep inflation close to the inflation target and stabilize resource utilization after 2027. The rate path is broadly in line with market expectations reflected in RIBA futures contracts. Public finances are deteriorating somewhat in 2026 and 2027, driven by defence outlays and Ukraine support — but the structural deficit (excluding these items) is projected to return to balance by 2030.
