IMF Staff Country Reports

This 2023 Article IV Consultation highlights that following the pandemic, Sweden’s economy experienced a strong recovery, which continued well into 2022. Sweden experienced a strong post-pandemic rebound in 2021–22 but is potentially heading into a recession. The fiscal stance is slightly contractionary in 2023, which is appropriately supportive of monetary policy. This stance should, however, be regularly reviewed in line with growth and inflation developments. Automatic stabilizers should be allowed to fully operate and, if needed, discretional expenditures should be adjusted. The rapid and decisive monetary policy response targeted at reigning in record high inflation is well justified. Notwithstanding the uncertain environment, given the priority to reduce inflation, the recent tightening and readiness to tighten further is welcome. Concrete progress in structural reforms is needed. Reforms should aim at addressing long-standing shortcomings in the labor and housing markets, educational gaps, employment of the foreign-born, and the bankruptcy framework. Fulfilling Sweden’s ambitious climate agenda will also require substantial effort and funding.