Sweden’s Revised Growth Forecasts: Navigating Economic Headwinds in 2025-2026

Sweden’s economic outlook has grown murkier in recent months, with official institutions revising GDP growth forecasts downward for 2025 and 2026. These adjustments, driven by global trade tensions, domestic labor market struggles, and lingering inflation, signal a need for investors to recalibrate expectations and prioritize resilience over growth bets.

Key Revisions and Their Causes

The National Institute of Economic Research (NEKR) slashed Sweden’s 2025 GDP growth forecast to 1.1%, down from its earlier 1.5% estimate, citing rising interest rates, a contracting manufacturing sector, and persistent inflation. The 2024 forecast was also trimmed to 1.4%, reflecting weak fourth-quarter performance, where GDP grew just 0.1% quarter-on-quarter. Meanwhile, the Swedish Export Credit Corporation (SEB) revised its 2026 projection down to 2.9%, from 3.1%, due to heightened trade policy risks and slower global demand. The OECD had initially forecast 2.6% growth for 2026, but SEB’s adjustment underscores growing concerns over U.S. tariff impacts and geopolitical fragmentation.

Sectoral Impacts: Winners and Losers

The revisions highlight stark divergences across industries:
1. Manufacturing and Exports: The sector shrank by 0.7% in Q4 2023, and SEB warns of a potential 10% decline in U.S. exports in 2025 due to tariffs. Companies reliant on American markets, such as machinery or automotive exporters, face pressure.
2. Green Energy Investments: Sectors like battery production and green steel remain bright spots. Sweden’s push for climate neutrality has spurred infrastructure spending, which could offset some external headwinds.
3. Housing and Consumer Spending: Residential investment is projected to grow slightly, with home prices rising 3–4% by 2026, assuming labor markets stabilize. However, households remain cautious: real wage growth and tax cuts may support consumption, but high debt levels and inflation risks temper optimism.

Data-Driven Insights for Investors

This comparison would reveal Sweden’s slower pace relative to peers, emphasizing its vulnerability to external shocks.

A drop in indices like OMX Stockholm 30’s export-heavy stocks could signal investor skepticism about global demand.

Investment Implications: Where to Look (and Avoid)

1. Avoid Overexposure to Exports: Investors should be wary of companies heavily dependent on U.S. trade, such as Electrolux or Scania.
2. Focus on Domestic Resilience: Consumer staples and healthcare firms, like Essity or AstraZeneca, may benefit from stable demand.
3. Green Tech Opportunities: Renewable energy projects and infrastructure stocks (e.g., Altor Fund’s investments) could thrive amid policy support.
4. Monitor Inflation and Rates: The Riksbank’s repo rate decisions will influence mortgage costs and consumer behavior. A stabilization of inflation below 2% by 2026 could ease monetary policy constraints.

Conclusion: Caution Amid Resilience

Sweden’s revised GDP forecasts reflect a landscape where structural challenges—trade wars, aging populations, and energy volatility—outweigh near-term recovery hopes. The 1.1% 2025 growth target and 2.9% 2026 projection (down from earlier estimates) underscore an economy navigating a fragile balance between fiscal stimulus and global headwinds.

Investors should prioritize sectors insulated from trade risks, such as healthcare and green energy, while avoiding overexposure to export-dependent industries. The Swedish government’s focus on deficit reduction and productivity reforms offers hope, but without a resolution to geopolitical tensions, growth will remain subdued. As the OECD notes, Sweden’s economy may not return to its pre-crisis potential growth rate of 1.75% until after 2026—a reminder that patience, not haste, is the watchword for investors in these uncertain times.