An aging economic cycle is encountering downside risks due to labour market bottlenecks and volatile financial markets while trade-related and other political uncertainties persists, but these decelerating forces are not strong enough to trigger a recession. Subdued inflation will also give central banks room to ease their pace of normalization. SEB is again lowering its GDP growth forecasts a bit, but the global economy will continue to grow at somewhat above its trend rate in 2019 and 2020.
In Sweden, the growth outlook has dimmed, with worrying signals from both the domestic economy and exporters thus weakening the forces that can offset the decline in home construction that is now under way. Yet expansionary economic policy is providing some support, and growth will rebound in 2020. GDP will increase by 1.6 per cent this year, well below SEB’s earlier forecast, followed by 1.9 per cent in 2020.
Low inflation is one reason why Sweden’s Riksbank will be satisfied with one interest rate hike per year, bringing its key rate to 0.25 per cent by the end of 2020. The krona will appreciate only slowly to 9.70 per euro at year-end 2020. Read the complete report here.