SEB: Nordic Outlook: Growth and markets withstand challenges

The world economy showed surprising resilience last year, but the outlook is challenged by constant new moves from the White House. We believe that growth will hold up without gaining traction, and that global GDP will grow by just over 3 per cent in both 2026 and 2027. Rapid structural shifts in the economy and political tensions both within and between countries are placing heightened demands on politicians and decision-makers. Fiscal policy lends support despite high debt and continued rate cuts by the Fed, while other central banks, such as the ECB and the Riksbank, stay on hold. In Sweden, growth has clearly accelerated even before the fiscal stimulus measures for 2026 have begun to take effect, and inflation falls well below the target this year, even excluding the reduction in food VAT.
  
Despite tariffs and political uncertainty, the GDP outcome in 2025 looks to be better than expected in both the US and globally. Our main scenario is that global GDP continues to grow around trend, at just over 3 per cent annually during 2026-2027. The US economy remains resilient with growth just above 2 per cent this year, albeit with last year's drivers - consumption and AI investment - losing some traction. The weak labour market is a risk, while the tax cuts decided last year provide increased support. Growth in the euro area of just over 1 per cent this year is driven by household consumption, supported by a strong labour market and rising real wages, investment and Germany's defence and infrastructure initiatives. China meets its 5 per cent growth target thanks to fiscal policy and heightened exports. 

Political issues with potentially major implications 
"The economic and financial outlook still features elevated uncertainty and increasing complexity in global relations, as President Trump continues to gradually undermine both a rules-based international order and security-policy cooperation frameworks like NATO," comments Daniel Bergvall, SEB's Head of Economic Forecasting.

In the US, the Supreme Court is expected to clarify the boundaries of presidential power, in areas such as the independence of the Federal Reserve and tariff policy. Our main assumption is that average US tariff rates remain around 15 per cent, although developments show that President Trump does not shy away from using this "multi-tool" and more threats and increases may be in store. So far, the EU has opted for negotiation over escalation, but is also signalling greater readiness to act when limits are reached and with powerful instruments as a last resort.

"The world breathed a sigh of relief when Trump announced in Davos that there will be neither a military intervention against Denmark to take control of Greenland, nor any additional tariffs on a number of European countries. But, the start of the year has sent a clear signal - the trade issues are not resolved," explains SEB's Chief Economist Jens Magnusson. 

Europe caught between the US and China
Many countries now find themselves at a troublesome crossroads in terms of security and trade policy. A possible ceasefire in Ukraine could have some positive growth effects, but steps towards peace are slow. At the same time, European companies are being squeezed by China's export-driven growth model and the EU's own structural problems, not least low productivity growth. However, the EU could unleash significant economic potential if political decisions reinforce the internal market.

"Could 2026 be the year when, under pressure from deteriorating relations with the US and intensifying competition from China, Europe's long-term growth agenda finally takes off? Our forecast is that the US economy continues to grow faster than in the EU, but that German growth will pick up and finally rise above its potential level. The Nordics stand out positively," comments Jens Magnusson.
 
Inflation trend mostly favourable
Wage increases have slowed down, China's deflation continues, commodity prices are falling and several currencies that have strengthened against the dollar are keeping a lid on inflation in some countries. The Fed is expected to gradually cut interest rates in 2026 as tariff-related inflationary impulses subside, while the ECB has already reached its rate trough. Japan bucks the trend with a further rate hike.

Sweden: High growth and low inflation
A strong third quarter and an upward revision to the first half of the year look to have given higher than expected growth in 2025. The GDP forecast has been revised upwards to 1.7 per cent. Indicators like the PMI and Economic Tendency Survey support indications of growth being set to increase. The forecast for 2026 has been raised by a couple of tenths to 3.0 per cent and we maintain our forecast of 2.9 per cent growth in 2027.

"More and more pieces of the puzzle are falling into place. Growth has picked up clearly even before the fiscal stimulus measures decided last year have started to take effect. A stronger labour market and sustained rising real wages point to solid growth in 2027 as well," says Daniel Bergvall.

Industry has withstood sluggish global industrial activity and higher tariffs, and despite a clearly stronger krona last year, exports have accelerated. Brighter outlook in Germany and the EU, as well as rising industrial confidence, point to sustained export growth of around five per cent annually over the forecast period.

Industrial investment is, after a temporary slowdown, expected to pick up again, buoyed by investments in defence and power transmission. Housing investments bottomed out in 2024 and are expected to rise slightly in 2026-2027. In total, we expect investments to increase by around four per cent annually. Housing prices were unchanged in 2025 but are now turning upwards. Stronger household finances, eased amortisation requirements and an increased mortgage cap point to a price increase of around five per cent in 2026 and three per cent in 2027. 

The upturn hinges on households 
Households are the greatest uncertainty factor. Saving rose to record levels last year and confidence remained low. However, consumption rose in 2025, with an acceleration towards the end of the year. Low inflation, tax cuts and a sustained rise in real income (2.7 per cent per year on average during 2025-2027) pave the way for a clearer upswing this year. The labour market is the final crucial piece of the puzzle; while employment shows cautious signs of improvement, unemployment has not yet peaked.

Inflation fell unexpectedly rapidly towards the end of 2025 and CPIF excluding energy is expected to end up at around 1.1 per cent in 2026, falling clearly below the target even adjusted for reduced food VAT. A stronger krona, falling international prices and lower wage and rent increases add to the low inflationary pressure. We believe the Riksbank will keep the policy rate unchanged at 1.75 per cent for most of 2026. 

"The combination of low inflation and high unemployment at the outset causes the Riksbank to wait with a policy rate hike. The Executive Board is divided and our assessment is that there is a greater probability of a rate cut this year than of a hike. An initial hike is not expected until the end of 2027," says Jens Magnusson.

Fiscal policy is highly expansionary
Fiscal policy is highly expansionary in 2026, with reforms - chiefly lower taxes - totalling SEK 80 billion. Including support for Ukraine and increased defence spending would bring the expansionary effect to around SEK 130 billion. General government debt is expected to rise to 37 per cent of GDP in 2027. 

"Scope for further stimulus will then decline, although we expect new unfunded reforms after the election, aimed mainly at households. While the rise in general government debt is substantial, if we assume that the deviation from budgetary rules is temporary, central government debt will remain at moderate levels by international standards," explains Jens Magnusson. 

Key data: International & Swedish economy (figures in brackets from Nordic Outlook November 2025)