Sweden’s economy to grow strongly, inflation accelerating

Last year, Sweden’s economy grew strongly. The economic growth was over twice that of the euro area’s economic growth. Capital investment, the export sector and domestic demand grew positively. In particular, housing sector investment grew markedly. The positive development is expected to continue for the time being as the Swedish economy is being underpinned by expansionary monetary policy, noted Commerzbank in a research report. Hence the economy is expected to expand at the similar rate as seen in 2015.

Moreover, there are positive signs regarding inflation. The inflation rate was close to 0% by the end of 2015. But in March and April the rate rose markedly to 0.8%. The underlying inflation rate reached 1.5% in March and 1.4% in April. But the inflation report witnessed in the last few months varied markedly so that the current inflation data is expected to satisfy the central bank but not permit to “sound all-clear on the inflation front”, added Commerzbank.

Therefore the Riksbank continues to be vigilant. It maintained its interest rates at -0.5% in April; however it extended the bond buying  programme by SEK 45 billion until 2016-end. Also, the central bank revised its 2016 inflation outlook upward by 0.3 percentage points to 1%.