May 13, 2026
PRESS OFFICER: Boris Balabanov
Phone: +1 202 623-7100Email: MEDIA@IMF.org
A Concluding Statement describes the preliminary findings of IMF staff at the end of an official staff visit (or ‘mission’), in most cases to a member country. Missions are undertaken as part of regular (usually annual) consultations under Article IV of the IMF's Articles of Agreement, in the context of a request to use IMF resources (borrow from the IMF), as part of discussions of staff monitored programs, or as part of other staff monitoring of economic developments.
The authorities have consented to the publication of this statement. The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. Based on the preliminary findings of this mission, staff will prepare a report that, subject to management approval, will be presented to the IMF Executive Board for discussion and decision.
Washington, DC: Following a period of subdued economic activity since 2023, a cyclical recovery has taken hold, supported by accommodative policies. However, uncertainties are high as the war in the Middle East poses significant headwinds. Downside risks to growth and upside risks to inflation prevail. The authorities should be prepared to respond a range of possible outcomes. Sweden enters this era of heightened global uncertainty from a position of strength underpinned by credible policy frameworks, ample macroeconomic buffers, strong institutions, and a solid track record of effective policy implementation. The policy priorities are to navigate the current global environment, enhance resilience, and foster medium-term growth. Achieving these goals will require careful cyclical management, vigilance to evolving risks, preservation of buffers, sustained progress on structural reforms, and supporting efforts to deepen the EU single market.
Recent Developments and Outlook
A cyclical recovery took hold last year, driven by policy support and recovering real incomes. Real GDP growth picked up to 1.5 percent in 2025. Inflation has declined since August 2025, partly reflecting the past appreciation of the krona. Annual headline inflation fell to 0.8 percent in April, reflecting the impact of several temporary measures, such as the lower VAT rate on food. The presence of multiple temporary factors, combined with uncertainty about the persistence of underlying trends and shocks complicates the measurement of core inflation. However, indicators of trend inflation (excluding various one-off effects and energy) are low, and medium-term inflation expectations remain well anchored. The financial system remains sound, supported by robust capital and liquidity buffers, but underlying vulnerabilities associated to household indebtedness, high exposures to the real estate sector, and reliance on market‑based funding persist.
The outlook is characterized by elevated uncertainty related to the war in the Middle East, including the size and persistence of the energy shock and its implications for global financial conditions. Staff’s baseline assumes that the energy shock is temporary and largely unwinds in 2027 (based on market pricing as of May 1st), that fiscal policy is expansionary as envisaged in the 2026 budget, and that real incomes continue to recover. Under these assumptions, growth is projected at 2.1 percent in 2026 and 1.9 percent in 2027— exceeding potential output growth in both years and contributing to the closure of the negative output gap. The impact of the war in the Middle East is estimated to have shaved-off between 0.3-0.4 percentage points of cumulative growth over the two years. In turn, headline inflation is projected to remain slightly below target over the same period (1.6 percent in 2026 and 1.7 percent in 2027), as the temporary VAT cut on food is expected to broadly offset higher global energy prices. Trend inflation (excluding one-off effects and energy) is expected to gradually rise from its current low levels to around target in 2027, with the downward pull from slack dissipating as the output gap closes and higher fuel prices passes through to core inflation. Uncertainty around the baseline is high, with downside risks to growth and upside risks to inflation prevailing. A more protracted and intense war in the Middle East and delayed repair of energy infrastructure in the region could weaken sentiment and economic activity and push inflation above target, entailing difficult policy challenges.
Elevated uncertainty calls for vigilance and policy agility
Macroeconomic policy priorities include: (i) navigating the current shock, (ii) enhancing resilience in a world of frequent shocks through policies that preserve buffers and reduce vulnerabilities, and (iii) raising productivity—against a backdrop of an aging population and slower productivity growth—through sustained structural reforms that build on Sweden’s relative strengths. Supporting efforts to strengthen the EU single market would reinforce domestic reform initiatives and further enhance Sweden’s resilience.
Under the baseline scenario, characterized by a negative output gap, trend inflation converging to inflation target in 2027, and large uncertainties regarding the persistence of ongoing shocks, the current policy mix of an expansionary fiscal policy and a neutral monetary stance would provide support to the recovery while maintaining price stability and facilitating external rebalancing.
The current low inflation provides the Riksbank with a favorable starting point. Monetary policy can be on hold for now as upward and downward pressures broadly offset each other. Under the baseline scenario, underlying inflation is expected to converge towards the target in 2027. Moreover, the temporary VAT cut on food, which dampens inflation between April 2026 and March 2027, is set to expire at end-2027, adding to headline inflation in 2028. Against this backdrop, the Riksbank should continue to monitor inflation and inflation expectations closely and stand ready to adjust its stance based on data and developments, including indirect and second-round effects of ongoing shocks and the implications from changes in monetary policy stances abroad for the inflation outlook. Continued use of scenario analysis and clear communication will be important to navigate uncertainty and keep inflation expectations anchored. Ongoing refinements to the operational framework are likely to support monetary transmission in the evolving liquidity environment. The monetary policy framework is strong, with the 2026 external review a solid basis for targeted improvements.
The expansionary fiscal stance currently in place will support economic activity. In response to the war’s impact on energy prices, the authorities cut taxes on petrol and diesel and introduced an additional electricity and gas subsidy for households in an amendment budget. While these measures are timely and temporary, they distort price signals, discouraging energy conservation at a time of constrained global supply. Similarly, while the VAT reduction contributes to containing inflation in the near term, it should be phased out as planned, as it creates distortions. Overall, in a more shock-prone global environment, there is scope to better target discretionary support to vulnerable and affected households to preserve fiscal space. If downside risks to growth materialize, automatic stabilizers should be allowed to operate and any additional support should be temporary, targeted to vulnerable households, and preserve price signals. In this context, the authorities should consider developing systems to provide targeted, timely and effective support to vulnerable households.
The fiscal framework is central to managing risks and ensuring long-term sustainability, underpinning strong and credible policy frameworks that enhance resilience to shocks. In light of increased defense spending needs, political parties in the Riksdag agreed that part of defense-related spending to be temporarily debt-financed, allowing deviations from the fiscal target. A new security policy assessment is scheduled before 2030, which will include a proposal to return to the balanced budget rule by 2035. Given the challenges posed by a higher frequency of macroeconomic shocks, to create space and preserve the credibility of the fiscal policy framework, the authorities are encouraged to bring these new permanent spending needs within the fiscal framework and clarify adjustment plans toward fiscal targets at an early stage. In addition, close monitoring of large spending items, such as nuclear financing, and continued efforts to improve spending efficiency will help preserve buffers and mitigate fiscal risks.
While systemic financial risks have moderated somewhat, they remain elevated reflecting high household indebtedness, exposures to the real estate sector, reliance on market and foreign-currency funding, and interconnectedness between banks and nonbank financial institutions. These vulnerabilities warrant continued close monitoring. Macroprudential policy settings, including the Countercyclical Capital Buffer (CCyB), should remain unchanged. In a downside scenario, and if signs of credit availability constraints emerge, the authorities should be ready to release the CCyB. Going forward, a cautious and data driven approach to financial sector and macroprudential policies remains important to safeguard resilience. The recent easing of mortgage lending regulations is expected to have moderate effects on house prices, but its impact on household balance sheets and housing market dynamics should be closely monitored. Over time, borrower-based measures should be complemented by an income-based limit, supported by improved collection of and access to granular data on household balance sheets.
The authorities’ continued progress in addressing the recommendations of the 2023 FSAP, including the implementation of EU-level reforms on fund liquidity management, is welcome, and would help to mitigate risks in the financial system. Continued strong oversight of foreign currency liquidity risks and vulnerabilities in the nonbank financial sector is important. The division of macroprudential and crisis-management responsibilities underscores the importance of strong coordination and cooperation across institutions. Robust mechanisms to ensure effective cooperation of macroprudential policies, will help preserve the authorities’ capacity to act decisively in a rapidly evolving financial landscape.
Boosting productivity growth is critical to raise medium-term growth, enhance macroeconomic resilience and support rising spending needs linked to aging, defense, and the green transition. Sweden’s labor productivity remains among the highest in the EU, but productivity growth has slowed down, suggesting that some structural bottlenecks are binding. The Productivity Commission’s cross‑sectoral reform agenda provides a good basis for identifying policy priorities. These include reducing housing and rental market distortions, strengthening public administration, and closing infrastructure gaps. Addressing these bottlenecks would improve resource allocation across firms and regions, better leverage Sweden’s main economic hubs, enhance gains from deeper specialization, and ease labor market pressures in counties with the highest unemployment rate. Further integration of the EU single market, together with spillovers from structural reforms in other member states, would reinforce Sweden’s domestic reform agenda and enhance resilience.
Sweden holds comparative advantages across key building blocks of the artificial intelligence (AI) ecosystem, reflected in the rapid uptake of AI among Swedish firms. While nearly half of the labor force stands to benefit from AI deployment, about one-fifth faces heightened vulnerability. Policies that support AI diffusion, while addressing skill mismatches and targeted labor market transitions, will be key to realizing productivity gains from AI in an inclusive manner.
Continued efforts to strengthen Sweden’s internal electricity grids and interconnectedness would promote energy efficiency and support a flexible adaptation to evolving energy needs. Going forward, as continental Europe transitions toward an increasingly fossil-free electricity system and expands its grid infrastructure, Sweden could leverage its generation capacity and net exporter position to reduce fiscal and macroeconomic risks associated with large-scale energy investments, while strengthening resilience against shocks.
Additional measures are likely to be required to meet the 2030 interim climate targets. Under the latest projections, Sweden is expected to fall short of its ESR commitment in 2030. To ensure convergence towards targets, new measures should focus on sectors where abatement has proven most challenging. Policies with adverse environmental effects, such as weakening emission-reduction obligations or distorting price signals, should be avoided.
An International Monetary Fund mission visited Stockholm and held discussions with the Swedish authorities during May 4–13, 2026, in the context of the 2026 Article IV consultation. The mission met with senior officials from the Ministry of Finance, the Riksbank, the Financial Supervisory Authority, the National Debt Office, members of parliament, and representatives from social partners, academia, and the private sector. The mission team thanks the authorities and counterparts for their constructive and open dialogue, and hospitality.
