Sweden lowers 2025 GDP growth forecast to 0.9%

The Swedish government significantly revised its economic outlook, cutting the 2025 GDP growth forecast to 0.9% from a previous 1.8% (May outlook), while simultaneously raising its 2026 projection to 2.6% from 2.3%. This adjustment reflects a notable shift in expectations for Sweden's near-term economic performance.

Analysis

The Swedish government has materially revised its economic outlook, signaling a significant near-term slowdown followed by a stronger-than-anticipated recovery. The GDP growth forecast for 2025 has been halved to 0.9% from the 1.8% projected in May, indicating substantial headwinds for the domestic economy in the coming year. This sharp downgrade is the primary driver of the mildly negative sentiment surrounding the announcement. In contrast, policymakers have raised the 2026 growth projection to 2.6% from 2.3%, suggesting they view the 2025 weakness as a temporary trough before a more robust rebound. This creates a diverging two-year outlook, where immediate concerns over a deteriorating economy are balanced against longer-term optimism for a stronger recovery cycle.

Key Decisions for Investors

• Investors should reassess near-term holdings exposed to the Swedish domestic economy, as the sharp 2025 GDP downgrade to 0.9% implies potential pressure on corporate earnings and consumer spending.
• Consider the revised forecast as a 'lower-for-longer' scenario, potentially warranting a more defensive posture in Swedish assets until leading economic indicators show signs of bottoming out.
• The upward revision to 2026 growth may present an opportunity for long-term investors, but it would be prudent to await further confirmation of a recovery before shifting to a more aggressive pro-cyclical stance.