Sweden’s economy is moving into a stronger growth phase than many investors expect, and Handelsbanken says that mix of faster GDP, firmer labor markets and heavy public- and private-sector investment will eventually force the Riksbank to raise rates again.
Sweden GDP outlook and Riksbank rate hike view
That matters because Sweden is no longer just grinding through a soft patch — it is building several growth engines at once. Handelsbanken now sees GDP rising 2.6% this year and 2.4% next year, with growth still running at 1.8% in 2028 even as calendar effects fade. The bank says investments in defense, AI buildout, energy and infrastructure will keep rising, household real wages will increase by an average 2.2% this year, and unemployment should fall to about 7.5% by the end of 2028.
Sentiment Indicators
For investors, that is a far more supportive backdrop for Swedish cyclicals, banks and domestic demand than the market may be pricing. If households keep gaining purchasing power and companies continue to spend on industrial capacity, software, power systems and transport networks, earnings breadth should improve beyond the usual export-heavy names. Handelsbanken chief economist Christina Nyman’s message is straightforward: Sweden has absorbed years of global uncertainty better than expected, and the combination of stronger investment and firmer consumption is creating a durable upswing.
The clearest policy implication is interest rates. Handelsbanken expects the Riksbank to begin tightening in December and lift the policy rate in two steps to 2.25%. That would be a meaningful shift for rate-sensitive assets, especially housing and leveraged consumer plays, even if the bank does not see a sharp jump in borrowing costs. The point is not aggressive tightening; it is that the direction of travel is changing because underlying inflation is expected to firm as the recovery broadens.
That creates a split market. Housing builders remain the weak link, held back by high construction costs and lower population growth, while home prices are still forecast to rise nearly 6% next year and just under 4% in 2028. On the winning side are defense contractors, industrial suppliers, energy infrastructure groups and firms tied to digitalization and grid expansion. Sweden’s strong public finances also give policymakers room to keep supporting the economy without stressing the sovereign balance sheet.
The currency is another piece of the trade. Handelsbanken expects the krona to hold near current levels this year before strengthening against the euro as Sweden’s recovery outpaces the euro area and the rate gap narrows. That fits a broader macro setup in which Swedish assets can start to look less like a defensive Scandinavian bet and more like a leveraged play on capex, rearmament and productivity investment.
The market underestimates how powerful that combination can be. Sweden is not relying on one engine — it is stacking defense spending, AI infrastructure, energy investment and household income gains on top of an already resilient industrial base. If Handelsbanken is right, the next leg for Swedish equities should favor the companies selling picks and shovels into that boom, while housing-linked names and rate-sensitive borrowers remain the clearest laggards.
| Entity | Gains | Losses |
|---|---|---|
| Swedish banks | ▲Higher rates, stronger loan demand | ▼Margin pressure if growth slips |
| Defense, AI and energy suppliers | ▲Bigger capex cycle | ▼Housing builders |
| Swedish krona | ▲Narrower rate gap vs euro | ▼Euro-focused importers |
| Homebuyers and leveraged borrowers | ▲Firmer wages | ▼Higher policy rates |
