Multiple headwinds will push Sweden into recession in 2023. But with inflationary pressures still not abating, we expect the Riksbank to hike rates by an additional 50 basis points (bps) at this week’s meeting.
  • Our forecast is for the Riksbank to remain laser focused on inflation and to announce another 50bp hike on Thursday. 
  • This could be the final one of the cycle, but risks are skewed in the direction of another hike in April. 

  • We expect the recent Q4 GDP estimates to mark the beginning of a pattern of recessionary activity data. Our forecast is for 2023 GDP growth -0.9%. 

  • Swedish households are particularly vulnerable to the effects of higher rates due to the structure of the housing market. 

  • Firms are among the most highly leveraged in Europe, and thus also susceptible. 

  • The combined effects of recession and higher interest rates will see real incomes squeezed. This will take inflation on a path back towards target over the course of 2023. 

  • Our base case is for the severity of the recession, and the associated unwinding of inflationary pressure, to prompt easing by the Riksbank by the end of the year.