(Bloomberg) -- Sweden’s economy grew more than expected in the third quarter after the coronavirus receded during the summer months, freeing up pent-up demand during a brief respite from the pandemic.

Gross domestic product grew 4.9% from the second quarter, Statistics Sweden said on Friday. That’s more than the 4.3% expected in a Bloomberg survey of economists, and follows an 8% contraction in the three months through June.

But Sweden’s government has already warned that the rest of the year is likely to be grim, as temperatures drop and the pandemic tightens its grip.

What Bloomberg Economics Says...

“The 3Q bounce shows what’s possible if and when the spread of Covid-19 recedes and restrictions are eased. Today’s batch of data confirms that Sweden’s manufacturing industry had largely recovered, while the service industry was still lagging before the second wave of the virus.”

-- Johanna Jeansson, Bloomberg economist

Prime Minister Stefan Lofven has said that Sweden is now facing a dark winter as the virus triggers a spike in new cases, forcing the government to resort to stricter curbs on movement.

Read: Swedish Faith in Covid Strategy Plunges as ICU Beds Fill Up

Sweden’s Riksbank on Thursday published a bleak set of economic forecasts, including a weaker rebound next year than previously expected.

Maria Wallin Fredholm, an economist at Swedbank, said the latest data show “the trough was not quite as deep as expected” and it’s “good to see that goods exports data for October indicate continued export recovery.”

But, “other than that we know from our card transactions data from Swedbank Pay that consumption will be weak,” which means that the “recovery seen in 3Q is in some sense already history,” she said.

Read: Riksbank Expands QE; Says More Steps Possible Between Meetings

To fight the economic fallout from the pandemic, the Riksbank has resorted to unprecedented asset purchases, which were expanded by 40% on Thursday to 700 billion kronor ($82 billion). Though the bank has avoided negative interest rates since ending half a decade of the policy last year, it says it’s ready to go below zero again should the economic climate worsen.

While economists agree that the economic outlook is set to decline, Jeansson says that “the fact that manufacturing is holding up while the level of activity in the service industry is already depressed means the hit to activity from the renewed spread of the virus will be smaller than during the spring.” As a result, Bloomberg Economics expects Swedish GDP “to shrink only slightly in 4Q,” she said.

(Adds economist comments)

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