Swedish industry and the economy continue to be heavily affected by an uncertain global environment. This is shown in a new economic report from the Swedish Association of Engineering Industries and the Swedish Association of Industrial Employers, which notes that global turbulence is weighing on the industry.
Inflation and interest rates have fallen, but now significant global uncertainty resulting from new trade barriers and geopolitical tensions is holding back the economic recovery.
“We are seeing how a number of interrelated factors—from turbulent U.S. politics focused on protectionism to continued weak growth in Europe—are having a negative impact on global trade and the global economy as a whole. This directly affects the export industry and is dampening the recovery of the Swedish economy,” says Erik Spector, chief economist at Teknikföretagen.
The report shows that Sweden’s GDP growth is expected to be 1.4 percent in 2025, which is low after several years of near-zero growth. Growth is expected to increase slightly in 2026, reaching 2.3 percent, but the recovery is being hampered by weak demand from abroad and continued uncertainty.
– The expectation that growth in the Swedish economy and industry will pick up toward the end of the year is driven by the fact that we have been in a recession for quite some time and that economic policy has been—and is expected to become—more expansionary. The Riksbank is expected to cut interest rates twice during the second half of this year, says Kerstin Hallsten, chief economist at Industriarbetsgivarna.
The report also highlights increased risks of disruptions in supply chains and financial markets. A sharper slowdown in global trade or financial turmoil could quickly escalate and undermine the industry’s recovery.
“The industry is resilient, but not immune to disruptions in global trade or the financial system. Should these risks materialize, the consequences could be significant for both production and employment,” Kerstin Hallsten continues.
Unlike other industries, the defense industry is experiencing strong growth. However, it still accounts for only a small portion of total industrial output, and its contribution to investment growth is therefore limited.
– Growth in total investment will be limited to 1.2 percent in 2025, but is expected to pick up speed and grow by 3.6 percent in 2026 as uncertainty surrounding economic developments subsides and interest rates are lowered further. “This will drive industrial production,” says Erik Spector.
Overall, the Swedish Association of Engineering Industries and the Swedish Association of Industrial Employers assess that the recovery in Swedish industry will be slow. Some sectors are showing signs of beginning to turn around, but the picture is mixed and uncertainty is very high. Employment is expected to increase slightly in 2025, despite rising unemployment.
