The Swedish economy is booming, but it has peaked and entered a slowdown phase, the National Institute of Economic Research said Wednesday, as it raised the growth forecast for this year.
The think tank lifted the growth outlook for this year to 1.5 percent from 1.3 percent, mainly due to “a surprisingly strong fourth quarter last year spilling over into 2019”.
The GDP growth forecast for next year was trimmed to 1.4 percent from 1.5 percent.
The NIER expects investment to fall back slightly this year due to the recent deterioration in business confidence, considerable shortages of labor with the required skills and a continued decline in housing investment.
Unemployment is expected to bottom out this year at 6.3 percent and rise slightly next year. However, wage growth is expected to moderate.
Though inflation is expected to remain below 2 percent this year and next, the Riksbank is forecast to raise the repo rate at the end of this year and to hold fire until 2021.
For the first quarter of the year, the NIER expects flat GDP growth due to a negative correction in exports and stock-building.
Weakening consumer and business confidence and sluggish housing investment suggest GDP growth is likely to be slightly weaker than normal in the second quarter, the think tank said.
The household consumption growth forecast for this year was slashed to 1.8 percent from 2.3 percent. Gross fixed capital formation and stock-building are expected to shrink 0.1 percent and 0.4 percent, respectively, while the export growth outlook was raised to 3.6 percent from 3.2 percent.
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