234
Sweden The economy is expected to contract by 0.3% in 2023 and grow by 1.4% in 2024. Private investment will decline in 2023, with construction activity set to drop significantly due to higher construction costs and falling housing prices. Elevated inflation will continue to reduce households’ real disposable income in the near term. Private consumption growth is projected to pick up somewhat from mid-2023 as real disposable incomes start to recover. Monetary policy should be tightened further as needed to curb inflation and ensure that inflation expectations are anchored. Temporary energy support should be gradually phased out to effectively manage inflationary pressure and help meet climate targets. Population ageing calls for mobilising underutilised labour resources, notably the low-skilled and the foreign-born. Achieving this goal requires reforms to taxes and benefits to strengthen work incentives and discourage income shifting from labour to capital, as well as easing rent controls. Weak private consumption weighs on growth After falling by 0.5% in 2022 Q4, GDP rebounded by 0.6% in 2023Q1, mainly driven by exports and inventories. However, household consumption and residential investment continued to decline. Property prices have fallen considerably, reducing investment and household wealth. Sentiment indicators point to very depressed household confidence. Manufacturing output has held up, with considerable order backlogs, but new orders are decreasing. The labour market has remained robust, but there are signs of a slowdown, with layoff notices increasing and companies preparing to downsize their workforce. Consumer price inflation with a fixed mortgage rate (CPIF) moderated to 7.6% in April, but CPIF inflation excluding energy stood at 8.4% suggesting broad inflationary pressures. In April, the social partners in the manufacturing sector agreed modest nominal wage increases of 4.1% in 2023 and 3.3% in 2024.
Sweden
1. Real estate price index for one- or two-dwelling buildings. The index has been deflated with the CPI. Source: The Riksbank; and Statistics Sweden. StatLink 2 https://stat.link/fongh5
OECD ECONOMIC OUTLOOK, VOLUME 2023 ISSUE 1: PRELIMINARY VERSION © OECD 2023