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Press release

Swedbank Economic Outlook: Swedish economy stagnate

Swedbank

"So far, Swedish growth has been a positive surprise. But now we expect a clear deceleration in the wake of high inflation, rapidly rising interest costs and a deterioration in household purchasing power. High energy prices are hurting Swedish households," says Mattias Persson, Group Chief Economist, Swedbank.  
 
Cost shock slows growth
Household purchasing power is rapidly eroding. The same applies to housing construction, as input prices have soared in line with rising interest rates. Our forecast for Swedish growth in 2023 has been revised down to 0.4 per cent this year compared to the previous forecast of 2.3 per cent, issued in April.
 
Global growth is expected to reach 2 per cent in 2023 and 3.4 per cent in 2024, down from a forecast of 3.5 per cent in 2023. In Sweden, growth is expected to be 1.5 per cent in 2024.
 
"We expect the inflation peak to be reached in the fourth quarter of this year. The sharp and now broad rise in inflation will probably force the Riksbank to tighten monetary policy significantly in the near future," Mattias Persson says.
 
Policy rate continues to rise
Swedbank's forecast is that the Riksbank will raise the policy rate by 75 basis points to 1.5 per cent when the central bank meets in September, and that the rate will then be raised until February 2023, when it will reach 2.25 per cent. 

"We'll see the turnaround during the spring of 2024, when the Riksbank is expected to cut the policy rate by 25 basis points to 2 per cent," Mattias Persson says.  

Housing market moves downwards
On the housing market, prices are expected to fall further in the next six months. After that, they are expected to level off once uncertainty about rising mortgage rates has subsided and inflation declines again. Swedbank forecasts that house prices will fall about 15 per cent overall from the peak seen in February 2022 and will reach their lowest level in the first half of 2023.

A need for fiscal policy that provides support - without adding fuel to the fire
Swedbank expects unfunded measures of SEK 45 billion in 2023 and SEK 15 billion in 2024. This means a general government deficit and that the Maastricht debt will rise to just above 31 per cent of GDP in 2024.
 
"Swedish fiscal policy needs to strike a balance between supporting households and businesses and limiting stimulus. Reforms and investments that strengthen the Swedish economy's capacity for growth would be good, but a number of election promises involve lowering electricity prices through reduced taxes or price caps, and there is a risk that fiscal policy will be more of a hindrance than a help in the future," Mattias Persson says.   

For the full report, see attachment or visit: www.swedbank.com/seo 

Please see the attached press release for tables. 

Contact:
Mattias Persson, Group Chief Economist Swedbank, tel +46 73 094 29 56 
Hannes Mård, Communication Manager Swedbank, tel +46 73 057 41 95

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