Sweden faces recession lasting into 2024, finance minister says

© Reuters. FILE PHOTO: Woman strolls through the Sodermalm area of Stockholm, Sweden October 22, 2020. Amir Nabizadeh/TT News Agency via REUTERS

COPENHAGEN (Reuters) – The Swedish economy will enter a deeper, more long-lasting recession next year than previously forecast as soaring energy prices drive up inflation, hitting households and businesses, the country’s finance ministry said on Thursday.

Sweden’s gross domestic product is now expected to contract by 0.7% in 2023, compared to a November forecast for a 0.4% decline, while headline inflation is predicted at 6% next year, up from 5.2% seen earlier.

“I said in October that Sweden was heading towards an economic winter and what we see now is that the winter looks to be more protracted than we thought,” Finance Minister Elisabeth Svantesson told a news conference.

“The weak development … looks like it won’t bottom out until 2024,” she said.

The economy is now seen growing by just 1% in 2024, down from 2% seen previously, before recovering to growth of 2.7% in 2025, the ministry predicted.

Swedish households have become increasingly gloomy in recent months, hit by rampant inflation, rising mortgage costs and record-high electricity prices. Consumer confidence levels were close to record-lows in November.

“It is important to say that right now, we are not looking at an economic crisis, we are looking at an energy crisis. Many individuals are really struggling … but the economy as a whole isn’t,” Svantesson said.

The country’s central bank has hiked interest rates four times this year to 2.50% to combat the spiralling inflation. November CPIF, the inflation target measure for the Riksbank, was 9.5% in November, way above the 2% target.