Although Sweden's general government balance shifted to a deficit of -0.6% of GDP in 2023 due to declining revenues caused by a weaker economy, higher government consumption and increased defense spending, down from a surplus of +0.7% in 2022, the country's public finances remain robust. In response to the need for maintenance and replacement investments, energy sector expansion and enhanced defense capabilities, the government plans to increase spending over the next few years. Amid weak growth and rising unemployment, the general government balance widened further to -1.9% in 2024. As the economy began to recover in 2025, the deficit improved to -1.0%. We expect it to remain at least at this level in the election year of 2026. Although public debt is rising, it remains below the debt anchor of 35% of GDP during the forecast period. This is low from a historical perspective, and confidence in public finances thus remains intact. Public debt is expected to rise to 34.4% in 2026 and 34.8% in 2027. Nevertheless, Sweden will maintain one of the lowest debt levels among advanced economies.

In the medium term, financial stability could be jeopardized by excessive household debt, primarily related to property and mortgages, which account for around 80% of the total. The sharp decline in house prices in 2023, coupled with high debt levels, interest rates and a weak economy, has increased mortgage costs for households in recent years. However, the stabilization of the housing market in 2024, coupled with decreasing interest rates and signs of recovery in 2025, meant that household debt began to stabilize and decline slightly from its peak. The debt-to-GDP ratio fell slightly to 86% by late 2024 and hovered around this level in mid-2025. New lending slowed, with households exercising caution when borrowing, which indicates that risks are easing. The debt to income ratio stood at 180% as of late 2024, through there is strong solvency and savings that reduce the risk of fallout. However, vigilance is still needed due to high exposure remaining a concern. Despite ongoing high financing costs, the recovery will gain further momentum in 2026.

Sweden boasts one of the world's best business environments. The country is recognized for its innovation, strong R&D performance and vibrant start-up scene. The country is a global leader in green technology and circular economy models. This favorable business climate is supported by a highly skilled workforce, robust infrastructure and a strong appeal to foreign investors.

Sweden has been governed by a coalition of the Moderate Party, the Christian Democrats and the Liberals since September 2022 with Ulf Kristersson as the Prime Minister. Sweden will face general elections in fall 2026. The country is currently undergoing a significant transformation in terms of its security and defense policy. Having joined NATO in March 2024, Sweden has already doubled its defense spending since 2020 and plans involve a substantial Cold-War-era increase, with the aim of reaching 2.8% in 2026, 3.1% in 2028 and ultimately 3.5% by 2030.