The Swedish economy is poised for a significant growth spurt in 2025, driven by increased domestic household consumption. According to the Swedish Trade Union Confederation (LO), this growth will be fueled by a strong recovery in real wages, with wage demands at 4.2 percent signaling a clear ambition to negotiate higher wage increases than in the previous decade.
Torbjörn Hållö, LO’s chief economist, emphasized the role of rising real wages in boosting household consumption. “The recovery is also supported by the Riksbank’s adjustment of interest rates to Swedish conditions,” he added. Additionally, the government’s more expansionary fiscal policy is expected to contribute to the economic recovery, although Hållö noted that much of the tax cuts benefit high-income earners and savings, which may limit its effectiveness.
LO further highlighted that the Riksbank has accelerated its pace of interest rate cuts, with expectations for the policy rate to decline to 1.75 percent by the end of 2025, down from the current level of 2.75 percent. This monetary policy stance is aimed at stimulating economic activity and supporting growth in the coming years.
In terms of key economic indicators for Sweden, LO’s projections show a positive trajectory for 2025:
– GDP growth is expected to reach 2.1 percent, building on the momentum from previous years.
– Unemployment is forecasted to decline slightly to 8.3 percent, reflecting gradual improvements in the labor market.
– Consumer price inflation (CPI) is projected to stabilize at 0.0 percent, indicating a more balanced price environment.
– The policy rate is anticipated to fall to 1.75 percent by the end of 2025, reflecting the Riksbank’s accommodative stance.
These forecasts underscore the positive outlook for the Swedish economy, driven by a combination of factors such as rising household consumption, supportive monetary policy, and government stimulus measures. As Sweden navigates the post-pandemic recovery phase, stakeholders are optimistic about the country’s economic prospects and the potential for sustained growth in the years ahead.