Next year looks promising for Sweden, according to Torbjörn Isaksson, chief analyst at Nordea. Lower interest rates and budget investments are expected to stimulate demand and consumption.
There are reasons for some optimism. We have a competitive business sector and strong public finances. This allows us to have an expansive fiscal policy in 2025 without eroding confidence in public finances. This could have an impact on growth, he adds.
Black Swans
However, Sweden is a small and open economy. Growth is largely determined by trade with the rest of the world. And after years marked by pandemic, transport disruptions, inflation shocks, the Ukraine war, and last year's dramatic developments in the Middle East, it is difficult to rule out new so-called "black swans" – unexpected events with major consequences.
"The most surprising thing that could happen would be if there were no surprises," write Deutsche Bank strategists Jim Reid and Henry Allen in a recent analysis.
And even if the unknown "black swans" do not strike in 2025, there are expected to be many changes – for better or worse.
"We believe that the world is currently undergoing a transformation at a pace and scope rarely seen," writes Eric Veiel, global investment chief at asset manager T Rowe Price in a recent report on the outlook for 2025.
He sees AI development and new medical breakthroughs on the horizon. But he also identifies known risks: the Ukraine war, the Middle East, and the risk of trade wars if the incoming US President Donald Trump makes good on his threats of new tariffs.
Not Benefiting the World Economy
In the Middle East, Iran's next move is the biggest risk, according to Jens Magnusson, SEB's chief economist. The Ukraine war, he believes, could enter a new phase after a period of signals about a ceasefire.
As for Trump's tariff threats, the situation looks grim.
I don't think it needs to be a disaster for Sweden. But the fragmentation we've already seen has already started to cost large sums. And if it accelerates now – with higher tariffs and trade wars – it won't benefit the world economy, says Magnusson.
Political turmoil in major eurozone countries such as Germany and France is also seen as a risk, as the need for clear European leadership increases with Trump in the White House.
Trade Wars
The incoming Trump administration's threats of tariffs and how Mexico, Canada, China, and the EU respond to this is a major risk, with the potential to hit production in certain countries, trade patterns, and supply chains in global trade.
Climate Change
Negative effects are already evident, including in coffee and cocoa, and could affect broader product groups as well.
Geopolitics
The Ukraine war, the Middle East conflict, tensions around Taiwan, and energy price shocks and disruptions to production of key products such as semiconductors and technology.
China
A prolonged property crisis and weak domestic demand are dampening China's potential growth and hitting global growth.
Eurozone
Fiscal problems, stagnation, and political uncertainty, particularly in France and Germany, pose potential sparks that could trigger a new euro crisis.
Financial Bubbles
The fall is great for tech stocks on Wall Street and for cryptocurrency, which are currently hovering at record levels. A stock market crash is expected to have spillover effects.
The world economy is expected to grow by around 3.1 percent in 2025, according to forecasters at the OECD and the IMF.
And global inflation is expected to nearly halve to 3.4 percent, according to Bloomberg Economics.
The IMF's growth forecast for 2024-2029 averages 3.1 percent, lower than the average growth rate before the pandemic and inflation shock. And the downside risk, i.e., the risk that it will be even worse than in the forecasts, is seen as high by most assessors.
"Downside risks are increasing and now dominate the outlook," writes Pierre-Olivier Gourinchas, chief economist at the IMF, in a recent blog post.
