(Bloomberg) -- Stronger purchasing power of Swedish households is set to fuel an economic rebound in the Nordic country that could outpace gains by its peers, according to Svenska Handelsbanken AB.
Handelsbanken now expects Swedish output to expand by 0.9% this year, up from 0.4% forecast in the previous edition of the report, which was published in May. That is slightly higher than the forecast for the euro area and the bank expects that gap to widen in the coming years.
The upgrade comes as central banks around the world are planning to take borrowing costs lower. SHB economists expect that the Swedish Riksbank will take its benchmark rate to 2.25% by the end of next year from 3.5% currently, in line with the median estimate of analysts compiled by Bloomberg last month.
”We are heading toward a soft landing globally, where Sweden has good conditions for a stronger recovery,” Chief Economist Christina Nyman said in a comment to the bank’s Global Macro Forecast, published Wednesday.
The effects of interest-rate cuts on the Swedish economy should come relatively fast, as borrowers in Sweden typically have interest rates fixed on short terms. Combined with tax cuts and rising wages, that should yield an increase in purchasing power next year corresponding to about 2,500 kronor ($241) a month for a family that has an averaged-sized mortgage, according to Handelsbanken’s calculations.
The strengthening demand from households could offset a more cautious outlook for Sweden’s large export sector, as global growth remains modest.
For 2025 and 2026, respectively, Handelsbanken has penciled in output expansions of 2.5% and 2.7%, which is clearly higher than for the euro area, where it doesn’t expect growth to exceed 1.5% in the next two years.
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