The government unveiled its Spring Budget on April 15. This budget comes in the context of sharply declining inflation, while the Swedish economy faces a recession, with slow GDP growth and increasing unemployment. Despite the forecasts from last spring, recent developments in the Swedish economy appear more positive compared to earlier this year. In fact, most upcoming projections indicate that the Swedish economy will recover “just in time.”
Households, however, remain under strain due to the earlier rise in inflation and elevated interest rates. Although the situation is delicate, anticipated interest rate cuts should help prevent a major drop in household consumption. Demand is currently at its lowest point, but the domestic economy is expected to gradually recover in the second half of 2024. Exports are also showing signs of improvement, though estimating the strength of the recovery remains particularly challenging. Inflation is likely to stay below, but close to, the 2% target.
The Riksbank’s policy rate is substantially higher than it was before the pandemic, and is expected to remain so even towards the end of the forecast period.