Real GDP growth is projected to rise by 1.9% in 2026 and 2.5% in 2027. Domestic demand is supported by a fiscal expansion, rising real incomes and a rebound in residential and public investment, particularly in defence. Unemployment is set to decline gradually from 8.9% in 2025 to 7.6% in 2027. Consumer price inflation with fixed mortgage rates (CPIF) is projected to fall to 1.2% in 2026 due to base effects and tax reductions, before returning to 1.9% in 2027. Risks are tilted to the downside, amid geopolitical tensions and elevated precautionary savings that may not decline as projected.

Monetary policy should remain focused on anchoring inflation expectations while looking through temporary price shocks and tax changes. Fiscal policy should preserve credibility under the new balanced-budget rule by anchoring the current expansion in a clear medium-term consolidation path. Energy support should remain temporary and targeted, to preserve energy-saving incentives and contain fiscal costs. Phasing out rent controls and tax subsidies to homeowners would help address housing market imbalances.

Despite rapid population growth, largely driven by immigration, Sweden's GDP per capita growth has outpaced most OECD countries over the past decade. The employment rate is the tenth highest in the OECD and has increased considerably among older workers and for vulnerable groups such as immigrant women. The capital stock has increased roughly in line with the OECD average over the same period.

Sweden’s economic fundamentals and institutions are strong, but challenges remain. Rent controls are the strictest in the OECD, limiting construction and labour mobility, contributing to overcrowded living and residential segregation. Necessary infrastructure investments are slowed down by planning processes. There is scope to further reduce the labour tax wedge by shifting the tax mix towards property and environmental taxes. Continued sharpening of skills can boost employment and innovation further.