Sweden’s Economy Prepares for Contraction Amid High Interest Rates, According to Nordea Bank

Scandinavia’s largest bank, Nordea Bank Abp, has updated its 2024 GDP forecast for Sweden, now predicting a 0.5% contraction as a result of persistently high interest rates. This adjustment marks an increase from the bank’s previous estimate of a 0.2% contraction, highlighting the strength of Sweden’s economy amidst rising borrowing costs.

The bank has drawn comparisons between Sweden’s economic climate and the resilience demonstrated by the US economy under similar conditions. However, it cautioned that the sustained high interest rates could pressure households, leading to diminished consumer spending and a projected decline in housing prices of 5-10%.

Export markets are not anticipated to cushion the impact of this downturn. Despite these difficulties, economists at Nordea Bank characterize the situation as a “soft landing,” crediting it to Sweden’s solid economic foundation.

In addition to these economic effects, a slight decrease in employment is expected, reflecting the labor market’s resilience despite overall economic contraction. The forecast suggests that the economy is maneuvering through a tough landscape while capitalizing on its inherent strengths and resilience.

This article was generated with AI assistance and reviewed by an editor.