Country Forecast Sweden December 2017 Updater

Country Forecast Sweden December 2017 Updater

  • December 2017 •
  • Report ID: 359036 •
  • Format: PDF


  • A coalition government comprising the Social Democratic Party (SAP) and the Green Party has been in office since 2014. This centre-left coalition, which replaced the four-party, centre-right Alliance for Sweden government, has a smaller parliamentary minority than its predecessor, owing to a rise in the number of seats gained by the far-right Sweden Democrats (SD), which hold the balance of power in parliament.
  • In 2016 ad hoc co-operation between the coalition and the opposition parties prevented the SD from triggering a government crisis. Risks to political stability increased in 2017 after the Moderate Party announced that it was prepared to enter policy talks with the otherwise ostracised SD to unseat the SAP-led government. However, the Moderates have since changed their approach. With the exception of the SD, no party wants an early election. The Economist Intelligence Unit expects the coalition to last its full term, to 2018.
  • Under new leadership in late 2017 the Moderate Party announced that it would only accept parliamentary support from the SD, rejecting a potential coalition. In response, the SD indicated that it would not provide support without involvement in policymaking. This prevents the centre-right parties from forming a stable government after the election in September 2018. The SAP is leading in opinion polls, and could form a government with the Green Party and the centrist Alliance parties, although it would need support from the Left Party.
  • National security will remain a priority after a terrorist attack in the capital, Stockholm, in April, and in view of increased tensions with Russia. Sweden will co-operate more closely with NATO members and its Nordic neighbours, and will increase defence spending in 2018-22 to bolster its military capabilities.
  • In 2016 the Riksbank (the central bank) cut its main policy rate to -0.5% and launched a quantitative easing (QE) programme that will run until the end of 2017. Until July 2018 the bank will also intervene, if necessary, in the foreign-exchange market to offset appreciation pressures on the krona that would jeopardise its inflation target. We expect monetary policy to remain extremely accommodative, even as the Riksbank gradually tapers its QE programme in 2018.
  • The pace of economic growth eased in 2017. After real GDP growth of 3% in 2016, we estimate growth of 2.7% in 2017 and forecast growth of 2.6% in 2018, easing to 2.3% 2019-22, driven by private consumption and investment. Growth in Sweden will continue to outperform the EU average.


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