Nordea: Swedish Economy Poised for Recovery Driven by Lower Interest Rates
Nordea Bank Abp forecasts a rebound in the Swedish economy, attributing it to falling interest rates and increased household purchasing power. Economic growth is expected to accelerate from mid-2025.
Stockholm – The Swedish economy is set for a recovery, driven by improving domestic demand stemming from lower interest rates and stronger household purchasing power, according to a new economic outlook from Nordea Bank Abp. The forecast predicts that economic activity will pick up momentum from mid-2025.
Following a subdued 2024 marked by minimal GDP growth and rising unemployment, the situation is expected to improve. The Riksbank's rate cuts, initiated in May 2024, are beginning to filter through, although the lag effect of monetary policy means near-term economic activity will remain weak. Nordea anticipates that inflation will stay low, prompting further rate cuts by the Riksbank.
Despite the anticipated recovery, Nordea notes that interest rates are likely to remain higher than in the 2010s, suggesting a slower rebound compared to the post-pandemic surge. Unemployment and housing prices are not expected to reach their 2022-2023 peaks. The bank highlights that recent inflation and interest rate shocks have had a more significant negative impact on the economy than the pandemic.
Households are navigating a "soft landing," according to the report. After years of declining purchasing power and falling housing prices, signs of improvement are emerging. Housing prices have begun to rise, historically a good indicator of impending consumption growth. Household sentiment regarding the economy and their personal finances has also improved, suggesting a potential decrease in savings and an increase in spending throughout 2025 and 2026.