IMF Staff Country Reports

The 2023 Article IV Consultation discusses that the Swedish economy has slowed appreciably. Gross domestic product is estimated to have declined by 0.3 percent in 2023, driven by declining private consumption and residential investment, amid a significant tightening of financial conditions and eroding real incomes. Activity is expected to remain subdued during 2024 and pick up gradually thereafter. The labor market is showing signs of cooling, and employment growth has moderated. Wage growth has been modest. Private credit is declining, and real estate and equity prices have fallen from their 2022 peaks. Corporate bankruptcies have picked up sharply. In particular, the commercial real estate sector is severely hit, with highly leveraged and lowered-rated firms seeing their debt-carrying capacity indicators deteriorate significantly. The banking system remains resilient with strong profitability and sizeable capital and liquidity buffers. Structural reforms will be instrumental to strengthen medium-term growth and support social inclusion and the green transition. Efforts focused on upskilling and education opportunities and strengthening working incentives are welcome.