After impressive economic resilience during the COVID-19 pandemic and a strong rebound in 2021-2022, Sweden’s economic growth slowed in late 2022 and early 2023. The Swedish economy is expected to enter recession in the second half of 2023. Government forecasts predict negative GDP growth of -1.0% in 2023 and a gradual economic recovery in 2024, but only by +1.2%. Despite its current weakness, GDP is 5 percentage points higher than its peak before the COVID-19 pandemic.
Inflation is at its highest level for over 30 years, reaching 10.2% in December 2022 and 6.7% in May 2023. The Swedish National Bank’s key interest rate has risen in stages since 2022, as elsewhere in Europe, and currently stands at 3.75%, with a further upward trend, although it is expected to stabilise in autumn 2023.
Sweden’s public finances are likely to be affected by the gloomy economic situation. However, they remain solid and central government debt is at a historically low level, at around 33.5% of GDP in 2022, one of the lowest in Europe. On the other hand, corporate and private household debt is high and private savings are relatively low.
Sweden’s main structural economic challenges are the rigidity of the labour market, the malfunctioning of the real property sector, the shortage of skilled labour in certain sectors and access to employment for low-skilled migrants. The rigidity of the labour market has resulted in a particularly high unemployment rate compared to other European countries (7.3% in December 2022). Youth unemployment stands at 25%, one of the highest rates in the EU.
Sweden is one of the most innovative countries in the world. The start-up ecosystem is considered to be one of the three best in the world, and Stockholm has the second highest number of unicorns per capita in the world. Four major geographical and thematic clusters structure Sweden’s economic and innovation landscape: life sciences, the green transition and the electrification of transport, smart cities and artificial intelligence.
Against this difficult backdrop for the Swedish economy, trade between Switzerland and Sweden has fallen slightly by 1.5% in 2022, to CHF 3.1 billion. The main factors behind this slight decline are the appreciation of the Swiss franc against the Swedish krona, as well as weak economic growth in Sweden and high inflation.
by the Embassy of Switzerland in Sweden
30 June 2023
