The Swedish government is lowering its growth forecast for this year to 2.8 percent, down from a previous projection of 3.0 percent in December, according to the Finance Ministry. Finance Minister Elisabeth Svantesson attributed the revision to high global uncertainty, mainly due to the war in the Middle East and its consequences, alongside households still holding back on consumption. According to Svenska Dagbladet, Neda Shahbazi, an economist at SCB, described the Swedish economy as starting the new year with declining production in manufacturing, construction, and public authorities. The Konjunkturinstitutet noted that the recovery in the Swedish economy continues, but it is taking somewhat longer than anticipated.
Recent GDP data presents a complex picture, with Sweden's GDP falling by 1.1 percent in January compared to the previous month, according to SCB. However, the economy grew by 0.5 percent in the fourth quarter of 2024 compared to the third quarter, and by 2.1 percent compared to the same quarter in 2024, exceeding economists' average forecasts of 0.4 percent and 2.2 percent, respectively, as reported by Bloomberg. According to Realtid, Asuman Erenel, another SCB economist, described the economic development in February as largely unchanged compared to January, with small movements in several large aggregates, though SCB data shows a 1.6 percent year-on-year increase in February, calendar-adjusted.
In the fourth quarter of 2024, the upturn was mainly explained by strong net exports of goods and gross fixed capital formation, according to SCB. Calendar-adjusted GDP increased by 2.4 percent compared to the fourth quarter of 2023, with household final consumption rising by 0.7 percent and general government consumption up by 0.1 percent. Gross fixed capital formation rose by 1.8 percent, primarily due to investments in buildings and constructions, while changes in inventories negatively impacted GDP growth by 0.6 percentage points. Exports rose by 0.7 percent and imports fell by 0.5 percent. Value added increased by 1.7 percent in goods-producing industries and 0.3 percent in service-producing industries, with the total number of employed persons decreasing by 0.2 percent but hours worked rising by 0.5 percent. Household real disposable income grew by 3.5 percent year-on-year, while public administration showed a deficit of SEK 61.6 billion, up from SEK 51.5 billion in the same quarter of 2023.
Moving into 2025, economic indicators show slowing growth and shifting trade patterns, with the Swedish economy growing 0.5 percent quarter-on-quarter in the fourth quarter of 2025, exceeding initial estimates of 0.2 percent but slowing from a downwardly revised 0.8 percent growth in the previous period, according to research sources. On a yearly basis, GDP expanded 2.1 percent in the fourth quarter of 2025, slowing from 2.6 percent in the third quarter but above the flash estimate of 1.8 percent, with the full year 2025 growth at 1.5 percent. Net trade weighed on GDP in the fourth quarter of 2025, as exports fell 1.2 percent, driven by weak goods exports, while imports remained flat. Household consumption was unchanged at 0.9 percent in the fourth quarter of 2025. Fixed investments rose 2.9 percent in the fourth quarter of 2025, mainly due to machinery, equipment, and weapon systems.
The Swedish economy started the new year with declining production in manufacturing, construction, and public authorities.
Stock markets reacted to these economic signals and geopolitical tensions, with the broad OMXS index falling 1.7 percent at closing, in line with leading European exchanges and initial trading on Wall Street. Monday's decline erased the entire year's stock market rise in Stockholm, with heavyweights like Assa Abloy and SKF falling by 3.3 and 3.8 percent, respectively, though defense conglomerate Saab rose 3.1 percent against the trend. In Asia, South Korea's Kospi led with a 4.4 percent increase, while Japan's Nikkei 225 rose 2.1 percent and China's Shenzhen exchange gained 1.6 percent. Even the New York Stock Exchange's S&P 500 index turned from a 0.5 percent decline to close with a 0.8 percent gain.
Weak economic indicators persisted in early 2025, with SCB's short-term statistics showing that both the service sector's turnover and household consumption increased at a very low rate during the first months of the year. This means several central parts of the economy developed weakly simultaneously, without clear increases in any major sector. The monthly outcome provides an early indication that the economy continues to be in a situation with limited growth power.
Despite these economic headwinds, unemployment is expected to remain at 8.8 percent, and the inflation forecast is raised to 1.2 percent in KPIF inflation this year, from previously 1.1 percent, according to multiple sources.
Geopolitical developments added to the uncertainty, with the war in the Middle East impacting global markets since traffic in the Strait of Hormuz has essentially completely stopped, according to multiple reports. The Strait of Hormuz is one of the world's most strategically important shipping passages, and the stoppage has a major effect on oil prices, which have surged in recent days, with Brent oil topping around $119 per barrel overnight to Monday and hovering around $100 per barrel during afternoon trading – the highest price since 2022. The price of fossil gas on Europe's commodity market is also trending upward, while Syria accuses Iran-backed Hezbollah of firing artillery shells into the country from Lebanon overnight, according to Syria via Sana. Additionally, Russia's foreign ministry summoned Japan's ambassador in Moscow to protest a Japanese company's investment in a Ukrainian drone manufacturer, after the Tokyo-based Terra Drone Corporation announced a strategic investment in Amazing Drones, a company based in Kharkiv that develops and manufactures interceptor drones, as reported by Japan Today.
The economic development in February was largely unchanged compared to January, with small movements in several large aggregates.
In context, the recovery in the Swedish economy that began in 2025 is expected to continue in 2026, according to the Finance Ministry, but the path remains uneven. Finance Minister Elisabeth Svantesson noted that uncertainty and unpredictability mean we do not know exactly where the Swedish economy is heading.
Reactions to the economic slowdown highlight the need for adaptive policies, though specific government measures to address the slower-than-expected recovery have not been detailed.
Key unknowns remain, including how long the traffic stoppage in the Strait of Hormuz is expected to last and its projected long-term impact on global oil prices, as well as the exact reasons behind the shift in net trade from positive contribution in the fourth quarter of 2024 to negative impact in the fourth quarter of 2025. According to Finance Minister Elisabeth Svantesson, if problems in the Strait of Hormuz continue for a long time, prices will rise.
Side developments include the Royal Opera moving its performances to Norra Djurgårdsstaden, where they will be located in Gasklocka 2 from 2027 to 2032, according to multiple reports. Additionally, Zorro Ranch in New Mexico is one of several luxury properties owned by Epstein, with most attention directed at the billionaire's island in the Caribbean, but many crimes are suspected to have been committed on the desert estate as well, and it is mentioned thousands of times in the millions of investigation documents that have been released.