OECD Raises Alarm on Growing Risks to Swedish Economy Amid Stagnation
The OECD warns of rising risks to Sweden's economy and recommends crucial reforms to stimulate growth.
Key Points
- • OECD warns of increased risks to the Swedish economy due to stagnation and global uncertainties.
- • Recommendations include phasing out rent controls and enhancing the housing market.
- • Significant emphasis on educational reforms and skills development for labor market improvement.
- • GDP growth is forecast to rise to 1.6% in 2025 and 2.3% by 2026, with inflation concerns persisting.
The Organisation for Economic Co-operation and Development (OECD) has issued a stark warning regarding the increasing risks facing the Swedish economy following a prolonged period of stagnation. The OECD's latest report, released on June 5, 2025, highlights that both global uncertainties and domestic economic conditions could pose significant challenges to Sweden’s financial stability and growth prospects.
After two years of stagnation, the OECD suggests that Sweden must adapt its policies to revitalize its economy. Among its key recommendations are the phasing out of rent controls and tax subsidies for homeowners, aimed at achieving a more balanced housing market. Additionally, the organization advocates for the deregulation of the rental market, allowing for more flexibility and efficiency within the housing sector (3078, 3080).
The report emphasizes the potential of digital tools to enhance the efficiency of building processes and streamline the granting of necessary permits for housing development. This approach could speed up construction and address the ongoing housing shortage in Sweden (3078, 3084).
Education reform is also highlighted as a critical area for improvement. The OECD calls for increased investment in higher education and stronger resources for active labor market policies, alongside more opportunities for adult education and internship programs to elevate skill levels among job seekers. Concerns were raised regarding the perceived decline in the quality of higher education and the low popularity of vocational training, which could hinder future workforce development (3077, 3080).
Although the OECD acknowledges Sweden’s commendable low national debt levels and stable fiscal framework, the organization warns that stagnation, combined with global trade tensions and geopolitical uncertainties, presents notable risks to Sweden’s economic outlook. The OECD forecasts a gradual recovery, with GDP growth projected to rise from 1.6% in 2025 to 2.3% by 2026, alongside expectations of increasing inflation rates peaking at 2.8% (3077, 3084).
As the Riksbank contemplates possible interest rate cuts due to slowing inflation, the potential for a fragile recovery is further complicated by high household debt and sensitivity to interest rate fluctuations (3078). The OECD’s analysis suggests a need for proactive policy adjustments to stimulate growth and mitigate both external and internal economic challenges, ensuring a stable path forward for the Swedish economy (3084).
In summary, the OECD’s recommendations highlight crucial reforms necessary to address the risks facing Sweden’s economy, illustrating a pressing need for strategic responses to foster long-term stability and prosperity.