(Bloomberg) -- Analysts at DNB Bank ASA raised their forecast for Sweden’s economic growth this year, with lower-than-expected inflation paving the way for more monetary easing by the Riksbank.
The largest Nordic economy should begin to recover by the end of 2024, with full-year gross domestic product expansion now seen at 0.9% versus the previous forecast of 0.5% from April, Ulf Andersson, chief economist for Sweden, said in the bank’s new economic outlook on Wednesday.
DNB’s view follows a string of recent data showing the expected Swedish recovery still isn’t materializing, including manufacturing output contracting last month and a preliminary estimate indicating that economic output contracted in the second quarter. Facing calls from analysts and trade groups to aid the stuttering economy, the Swedish central bank on Tuesday signaled faster easing by pledging as many as three additional quarter-point rate cuts.
“Several indicators suggest that the worst is over,” Andersson said. “The awaited pick-up in activity is primarily because Swedish inflation has been lower than expected, which should encourage the Riksbank to act somewhat faster with rate cuts.”
He expects three more interest-rate cuts from the Riksbank by March, forecasting a terminal level for borrowing costs at 2.75% for this cycle.
DNB, the largest lender in neighboring Norway, still revised its estimate for Swedish growth for the next two years slightly lower, to 2.2% in both 2025 and 2026, down from 2.3% seen in April. Its view compares with the consensus estimates for 2024 expansion of 0.6%, followed by next year’s growth of 1.9%, according to data compiled by Bloomberg.
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