Despite rapid population growth, largely driven by immigration, Sweden's GDP per capita growth has outpaced most OECD countries over the past decade. The employment rate is the tenth highest in the OECD and has increased considerably among older workers and for vulnerable groups such as immigrant women. The capital stock has increased roughly in line with the OECD average over the same period.

Sweden’s economic fundamentals and institutions are strong, but challenges remain. Rent controls are the strictest in the OECD, limiting construction and labour mobility, contributing to overcrowded living and residential segregation. Necessary infrastructure investments are slowed down by planning processes. There is scope to further reduce the labour tax wedge by shifting the tax mix towards property and environmental taxes. Continued sharpening of skills can boost employment and innovation further.

Real GDP growth is projected to increase from 1.6% in 2025 to 2.6% in 2026 and 2.3% in 2027. Fiscal stimulus, stable monetary policy, and buoyant domestic demand will support the recovery, following several years of weak activity. Unemployment is set to fall gradually from 8.7% in 2025 to 8.2% in 2027. Inflation, as measured by the consumer price index with a fixed mortgage rate, peaked at 2.8% in 2025 and is projected to decline to around 1.1% in 2026 amid temporary tax cuts before returning to the 2% target by the end of 2027. External headwinds and higher-than-expected household savings could weigh on growth.

With economic activity strengthening, monetary policy should continue to anchor inflation expectations, while fiscal policy credibility will hinge on the commitment to the new balanced-budget rule. Streamlining regulations, especially in housing and energy, would improve efficiency and speed up the green transition. Further efforts to enhance skills formation would ease labour shortages and help ensure that growth is more inclusive.