Danske Bank lowers Swedish GDP forecast

Swedish economy recovers slower than expected, according to a new forecast from Danske Bank's economists. They believe that this year's growth will stop at 0.7 per cent, which can be compared to an earlier forecast of 1.2 per cent.

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Danske Bank lowers Swedish GDP forecast
Photo: Claudio Bresciani / TT

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Next year, growth is expected to increase to 2.5 percent. Danske Bank's previous forecast was 2.4 percent.

"The growth rate will pick up speed. It is mainly the households' higher disposable income, a result of lower interest costs, increasing real wage growth and a stronger labor market, which gives a boost to household consumption and, in the long run, GDP growth", writes Danske Bank in its new Nordic Outlook.

Raised inflation forecast

The inflation forecast is simultaneously adjusted upwards to 3.0 percent this year and 1.7 percent in 2025. In the previous forecast, they counted on an inflation rate of 2.8 percent this year and 0.6 percent in 2025.

Danske Bank expects the Swedish Central Bank to face a series of rate cuts down to 1.75 percent by the summer of 2025. But there is a degree of uncertainty about this.

"What can throw a spanner in the works is, of course, if the Swedish Central Bank sees risks with the inflation development and chooses to move more slowly", writes Danske Bank's economists.

They estimate that the rent negotiations ahead of 2025 will end with rent increases in line with the last two years, i.e. around 5 percent.

The wage movement is expected to end with a benchmark of 3.2 percent in annual wage increases, according to Danske Bank.

Deflationary impulses from China

This "should be compatible with good real wage increases, low cost pressure and the inflation target", writes the bank.

The weakening of the krona has, according to Danske Bank's economists, not yet had a decisive effect on how much inflation is imported in trade with the rest of the world.

"As we understand it, the deflationary impulses from China have a greater impact on these prices than the reverse effect from the krona depreciation", they write.

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By TTEnglish edition by Sweden Herald, adapted for local and international readers

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