Sweden halves 2025 growth forecast to 0.9% on trade uncertainty

STOCKHOLM, June 24 (Reuters) - The Swedish government has cut its forecast for economic growth this year in half, its finance minister said on Tuesday, as geopolitical uncertainty, including from global tariffs, had made households and businesses wary of spending.

Gross domestic product is expected to increase 0.9% this year compared to May's forecast of 1.8%, Elisabeth Svantesson said.

"The trade war cut off the recovery (in 2024), pretty abruptly," Svantesson told reporters. "Right now it is consumption and also investment that is weighing on GDP, but we expect a recovery in the autumn."

Svantesson said it was unclear what the impact from U.S. President Donald Trump's "Liberation Day" tariffs announced on April 2 would be, as well as from the "significant escalation in the Middle East."

The Swedish economy shrank 0.2% in the three months to March 31 on a quarterly basis after registering growth of 1.0% over the full year 2024.

The minister added that a change in the way the statistics agency measured GDP had led to a historical downward revision in figures, which had also affected the latest forecast.

Sweden has increased public spending, not least on defence, and real wages have been rising, while interest rates are coming down, making the economy well-positioned for a recovery, Svantesson said.

The government raised its 2026 growth outlook to 2.6% from the 2.3% forecast in May.

Earlier this month, the central bank cut its key interest rate to 2.00% from 2.25% and could ease further before the end of the year to boost sluggish growth, amid weak price pressures.

Its growth forecast for this year is 1.2%, while leading think-tank NIER projects an expansion of 0.9%.