Swedish Economy Set for Strong Recovery, But Risks Loom, Handelsbanken Predicts
Stockholm – After three sluggish years, the Swedish economy is poised for a significant rebound, according to Handelsbanken’s latest economic forecast. However, the bank cautions that considerable risks remain, particularly concerning the United States’ recent tariff threats.
“We can see that the Swedish economy swings more than the Eurozone, both up and down, but that Sweden is fundamentally stronger than many believe,” says Christina Nyman, Chief Economist at Handelsbanken.
Key Insights from the Handelsbanken Report:
- Household Spending to Surge: Increased purchasing power will fuel a rise in consumer spending, aligning with income growth.
- Defense and AI Investments to Boost Growth: Significant investments in defense and artificial intelligence are expected to contribute substantially to economic expansion.
- Sweden to Lead Growth Among Peers: Handelsbanken projects Sweden to have the highest GDP growth among comparable nations in the coming years.
Geopolitical Tensions and Trade Concerns
Despite a turbulent geopolitical start to the year, Handelsbanken economists anticipate 2026 will be a year of recovery for Sweden. While exports have remained resilient despite tariffs and global uncertainty, the threat of new tariffs from the U.S. on European countries, including Sweden, poses a risk. These tariffs are reportedly aimed at pressuring countries to purchase Greenland. The EU is preparing countermeasures, raising the specter of an escalating trade conflict.
GDP Growth Forecast
Handelsbanken forecasts a GDP increase of 2.7 percent in 2026, up from 1.8 percent in 2025. Growth is expected to moderate to 2.2 percent in 2027 and 1.7 percent in 2028 as resource utilization normalizes and fiscal policy becomes less expansionary.
“A strong recovery this year is what is needed for the labor market to improve, and we expect a turnaround in the first quarter,” says Christina Nyman.
The Krona’s Ascent
The Swedish krona strengthened significantly in 2025 and is projected to appreciate further in 2026, particularly against the dollar. This is attributed to stronger Swedish growth, improved financial market functionality, and the belief that the krona remains undervalued. Inflation is expected to remain low in 2026, partly due to lower food prices and reduced cost pressures resulting from recent economic slowdowns.
“With low inflation, the Riksbank can be patient and allow the recovery to gain momentum before they start raising interest rates in 2027,” says Christina Nyman.
Sector-Specific Impacts
- Defense Investments Benefit Construction: The construction sector will benefit from defense-related infrastructure projects, increased municipal investments in areas like water and wastewater infrastructure, and the growing need for data centers.
- Consumer-Focused Businesses to Thrive: Companies catering to consumers will gain from increased purchasing power and demand for durable goods and services. A reduced VAT on food will provide an additional boost.
AI’s Impact on the Labor Market
AI is increasingly becoming a productivity driver for businesses, but its impact on the labor market will depend on the pace of adoption. Handelsbanken economists believe that obstacles to rapid AI implementation exist, leading to a gradual rollout over a decade. This slower pace will limit the impact on unemployment as companies and employees adapt and new jobs are created.
Unlike previous technological transformations that heavily impacted manufacturing jobs, AI is expected to primarily affect service sector positions. Regions with a high concentration of knowledge-intensive service jobs, such as Stockholm and Västra Götaland, are more exposed to AI.
“Being more exposed to AI does not automatically make you a winner or a loser. AI creates new specialized jobs, while others disappear. Each sector needs to be analyzed separately. Our assessment is that around 150,000 jobs will disappear in Sweden and roughly the same number of new ones will be created in the next ten years. Increased risks and opportunities go hand in hand,” says Christina Nyman.
Barriers to AI Adoption
Several factors are hindering the rapid advancement of AI, including:
- Energy Supply: Data centers consume a growing share of electricity, requiring increased capacity and renewable energy production.
- Skills Gap: A shortage of skilled workers is a major obstacle.
- Data Availability and Quality: Access to and quality of data, particularly in industries with abundant but fragmented data, is a challenge.
- Regulatory Uncertainty: Unclear regulations are also impacting development.
If these barriers are reduced, AI adoption could accelerate, potentially leading to the displacement of nearly 500,000 jobs over ten years. Such a rapid shift could strain the labor market, causing unemployment to rise during a transition phase, even as higher productivity boosts growth and tax revenues.
“A rapid increase in AI would require government intervention to mitigate the negative effects on the labor market,” says Christina Nyman.
Contact Information:
Christina Nyman, Chief Economist, Handelsbanken, +46 70 778 77 65
Handelsbanken Press Service, +46 8 701 80 18, press@handelsbanken.se
GDP Forecasts
Annual Average
| 2025 | 2026 | 2027 | 2028 | |
|---|---|---|---|---|
| Sweden* | 1.9 (1.1) | 2.7 (2.4) | 2.2 (2.4) | 1.7 |
| Sweden, Actual | 1.6 (1.3) | 2.9 (2.6) | 2.4 (2.5) | 1.5 |
| Norway, Mainland* | 1.6 (1.8) | 1.5 (1.6) | 1.6 (1.6) | 1.2 |
| Eurozone | 1.4 (1.3) | 0.9 (1.0) | 1.4 (1.4) | 1.2 |
| United Kingdom | 1.4 (1.4) | 0.8 (1.1) | 1.3 (1.1) | 1.5 |
| USA* | 2.2 (1.7) | 2.4 (1.5) | 2.0 (1.9) | 1.8 |
| China | 5.0 (4.7) | 4.5 (4.0) | 4.3 (4.1) | 4.0 |
*Calendar Adjusted
Key Interest Rate Forecasts
Year End
| 2025 | 2026 | 2027 | 2028 | |
|---|---|---|---|---|
| USA | 3.625 (3.625) | 3.375 (3.375) | 3.125 (3.125) | 3.125 |
| Eurozone | 2.00 (2.00) | 2.00 (1.75) | 2.00 (2.00) | 2.00 |
| Sweden | 1.75 (1.75) | 1.75 (1.75) | 2.25 (2.25) | 2.25 |
| United Kingdom | 3.75 (3.75) | 3.25 (3.50) | 3.25 (3.25) | 3.25 |
| Norway | 4.00 (4.00) | 3.50 (3.50) | 3.50 (3.50) | 3.50 |
Currency Forecasts
Year End
| 2025 | 2026 | 2027 | 2028 | |
|---|---|---|---|---|
| EUR/SEK | 10.83 (11.05) | 10.50 (10.75) | 10.30 (10.55) | 10.10 |
| USD/SEK | 9.21 (9.21) | 8.68 (8.88) | 8.58 (8.87) | 8.56 |
| GBP/SEK | 12.44 (12.85) | 12.21 (12.80) | 11.84 (12.56) | 11.48 |
| NOK/SEK | 0.91 (0.95) | 0.91 (0.97) | 0.90 (0.97) | 0.89 |
| EUR/USD | 1.18 (1.20) | 1.21 (1.21) | 1.20 (1.19) | 1.18 |
Source: Handelsbanken
In Parentheses: Handelsbanken’s Economic Update September 11, 2025
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