Sweden trims 2027 growth outlook as Middle East tensions mount

The right-wing coalition, currently trailing the centre-left opposition in polls ahead of the September general election, maintained its 2.3% growth projection for the current year. While the economy expanded by 2.0% year-on-year during the first quarter, the pace remains behind earlier expectations. Government statements suggest that while recovery has lost momentum due to external volatility, a rebound is anticipated in the second half of 2026.

Simultaneously, the central bank signaled a shift in monetary policy, noting that interest rate hikes are increasingly likely this year. The institution cited mounting inflationary pressures directly linked to the regional conflict, which has hampered growth prospects both domestically and internationally. Following a 1.5% GDP increase in 2025, the government faces the dual challenge of cooling inflation and stabilizing an economy sensitive to global energy shocks.