Sweden cuts 2024 growth estimate, sees downturn until 2025

STOCKHOLM, Dec 21 (Reuters) – The Swedish government on Thursday lowered its growth forecast for 2024 and said an ongoing downturn was likely to drag on until 2025 even as inflation gradually loosened its grip on the economy.

The government predicted gross domestic product (GDP) would rise by 0.6% in 2024, down from a previous expectation of a 1.0% rise. The economy was seen contracting 0.5% this year, up from a 0.8% decline seen previously.

“We are in an downturn, an economic winter. Prices are still high even though inflation is on the way down,” Svantesson told a news conference. “We see the slump continuing in 2024 and also into 2025.”

In 2025, the economy is expected to begin staging a recovery with GDP seen growing 2.7%, the government said.

The centre-right coalition government forecast headline inflation of 6.1% this year and 2.7% in 2024 against 6.0% and 2.7%, respectively, seen in September, still above the central bank’s 2%-threshold, but way down from a double digit clip recorded during the peak.

Higher interest rates have squeezed Swedish households and pushed the economy into recession. The economy contracted 0.3% in the third quarter this year compared to the previous.

The Riksbank has hiked its main rate to 4% from zero just 18 months ago but has indicated the rate has now likely has peaked.