Swedish Government Shifts Focus to Economic Growth Post Inflation Victory

The Swedish government has raised its economic growth forecast for 2024, signaling a victory in its fight against inflation. Finance Minister Elisabeth Svantesson stated that the government will now focus on boosting growth, with priorities including household purchasing power and structural reforms. The central bank expects further rate cuts this year.

The Swedish government on Monday raised its economic growth forecast for 2024, and said that with the fight against inflation now won, it could focus on boosting growth in its autumn budget.

The economy should grow 1.4% this year, after a strong first quarter, and 2.4% in 2025, the government said. That compared with a forecast of 0.7% and 2.5% growth, published in April. Headline inflation will average 1.9% this year and 1.7% in 2025, below the central bank's 2% target. The government's previous forecasts were for headline inflation of 2.1% this year and 1.7% in 2025.

"We see that the fight against inflation has been won and we are entering a new phase," Finance Minister Elisabeth Svantesson told reporters. "We can now have another kind of economic policy focused on growth; on making Sweden richer and more secure."

Svantesson said the government would prioritise boosting households' purchasing power, security, structural labour market reforms, fighting crime and defence in the budget, but did not say whether or by how much the government would increase spending. Swedish think tank NIER reckons the government has around 40 billion Swedish crowns ($3.82 billion) for tax cuts and other new measures in the budget for 2025.

Sweden's economy shrank marginally in 2023 and Svantesson said the economy would remain weak both this year and next. The central bank cut its key policy rate for the first time in eight years in May to 3.75% from 4.00%. It expects two further cuts sometime later this year.

The Riksbank announces its next monetary policy decision on Thursday, with analysts expecting no change in rates. ($1 = 10.4810 Swedish crowns)

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