Sweden’s Economic Growth Forecast Halved as Government Boosts Business Support
Sweden faces economic slowdown as growth forecast is cut and business support is increased.
Key Points
- • Sweden's 2025 growth forecast reduced from 1.8% to 0.9%.
- • Government enhances business support amid economic challenges.
- • Effectiveness of state support criticized as evaluation is challenging.
- • Inflation rose from 2.3% to 2.5% in June, influenced by travel costs.
Sweden is facing a significant economic slowdown in 2025, prompting the government to escalate its support for businesses. According to Finance Minister Elisabeth Svantesson, the projected economic growth for the year has been revised down from 1.8% to 0.9%, much lower than the 2.5% anticipated by the business community. This decline has been attributed to global economic uncertainties, particularly geopolitical tensions impacting economies worldwide.
In response to these adverse conditions, the Swedish government is increasing its investment in state support programs designed to bolster business development and competitiveness. Key agencies involved in the management of these funds include Vinnova, focused on innovation, Tillväxtverket, which aims to foster regional growth, and Energimyndigheten, overseeing energy transition efforts. However, a report from Tillväxtanalys raises concerns regarding the effectiveness of these state supports. It suggests that evaluating the outcomes of such funding initiatives poses challenges, which could potentially lead to wasted taxpayer money.
While the increased support aims to encourage investment, experts caution about the lack of clarity regarding the tangible benefits that such measures will yield.
Simultaneously, inflation trends are influencing Sweden's economic strategy. In June, inflation rose from 2.3% to 2.5%, fueled by increased costs associated with overseas travel. Despite this spike, Nordea’s chief analyst, Torbjörn Isaksson, believes the inflationary pressures are temporary and expects a decrease later this year. He mentioned that if the Swedish krona continues to weaken, it could trigger further interest rate cuts, potentially as soon as September, as the central bank responds to these economic conditions.
Overall, while the government’s commitment to supporting businesses is evident, uncertainties surrounding the impact of these measures, along with inflation trends, present a complex economic landscape for Sweden in 2025.