Sweden Raises Growth Forecast as Government Tries to Close Election Gap

The Swedish government has upgraded its economic outlook less than three weeks before the country goes to the polls, betting that a stronger recovery can translate into political support for the centre-right coalition.

The government now expects Sweden's GDP to grow by 2.5% in 2026, up from the 2.3% forecast issued in June. The forecast for 2027 was left unchanged at 2.5%.

Finance Minister Elisabeth Svantesson said Sweden was in a significantly stronger economic position than it had been in 2022, pointing to falling inflation, recovering domestic demand and an improving labour market. The government expects the Swedish economy to outperform the European Union as a whole, where growth is projected at around 1.1% this year.

A stronger economy, but a difficult political starting point

The timing of the upgraded forecast is significant. Sweden will hold parliamentary elections on September 13, and the governing coalition remains behind the centre-left opposition in opinion polls.

The latest figures cited by Reuters put the ruling coalition and its Sweden Democrats support party at 45.6%, compared with 52.4% for the opposition. The gap has narrowed in recent months, but the government still faces a difficult path to re-election.

That makes the economy one of the government's most important arguments in the final weeks of the campaign. After several years of weak household purchasing power and high living costs, the coalition is presenting the recovery as evidence that its economic policies are beginning to produce results.

The government has already cut fuel taxes, reduced VAT on food and increased tax credits for people in work. If re-elected, it is promising further measures aimed at household finances, including free kindergarten places and additional employment-related tax relief.

Recovery is reaching households — but not everyone feels it

The improved headline figures do not necessarily translate into a rapid improvement in how Swedish households perceive the economy.

Inflation has fallen below 1%, while wages and employment are improving. Household consumption has also strengthened, helped by higher real incomes and an improving labour market. Companies have increased investment and exports have performed strongly despite continuing global uncertainty.

But the Swedish government itself acknowledges that households, particularly lower-income groups, remain cautious. The cost-of-living shock that followed the pandemic has not simply disappeared because inflation has fallen.

This creates a political gap between macroeconomic indicators and everyday economic experience. GDP can recover while households continue to feel financially constrained, especially after several years of elevated food, energy and housing costs.

The recovery still faces external risks

The improved forecast does not mean Sweden has escaped the wider European economic pressures.

The government says geopolitical tensions and higher energy prices remain significant risks. Rising energy costs could put renewed pressure on inflation, while the heatwave that affected Europe this summer has already contributed to higher electricity prices and weaker agricultural output.

The Swedish economy is therefore entering the autumn with stronger domestic momentum but a highly uncertain external environment. The government expects growth to slow somewhat during the next six months as global uncertainty weighs on activity, even as stronger real wages, employment and investment support domestic demand.

For the centre-right coalition, however, the immediate challenge is political rather than purely economic. The latest figures give the government a stronger economic story to present to voters, but the election will ultimately depend on whether that recovery is visible enough in household finances to change voter sentiment before September 13.