The Swedish economy is rebounding, with projected GDP growth close to 4% in 2021 and 3½ per cent in 2022, on the back of rising exports, which boost manufacturing production and investment, and strong fiscal and monetary support. During the first half of 2021, pandemic-related restrictions and voluntary distancing have held back the recovery in services requiring face-to-face interaction, but growth will broaden during the second half of the year. Unemployment is expected to decline gradually. Inflation is set to remain below the 2% target throughout 2021 and 2022.
Monetary policy will remain very accommodative, but margins for further expansion are limited. Short‑time work and several schemes to help businesses have mitigated the impact of the crisis and further fiscal support is being provided in 2021. Support is to be phased out once the pandemic is brought under control and the recovery is well underway. The return to the budget surplus target should be very gradual. Monetary policy will need to remain accommodative until inflation is durably close to target, with activity expanding at a robust pace.