February 2, 2023

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Sweden is facing a recession that will last until 2024, the finance minister tells Reuters

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

COPENHAGEN (Reuters) – Sweden’s economy will enter a deeper, longer-lasting recession next year than previously forecast as rising energy prices push up inflation and hit 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 with a November forecast of a 0.4% contraction, while headline inflation will come in at 6% next year, versus 5.2% previously .

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

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

The economy is set to grow just 1% in 2024, up from 2% previously, before rebounding to 2.7% growth in 2025, the ministry forecast.

Swedish households have grown increasingly gloomy in recent months as they have been hit by rampant inflation, rising mortgage costs and record-high electricity prices. Consumer confidence was near record lows in November.

“It is important to say that at the moment we are not dealing with an economic crisis, but with an energy crisis. A lot of people are really struggling…but the economy as a whole isn’t,” Svantesson said.

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