Nordic Outlook: Growth challenged by rising interest rates and high energy prices

Despite global uncertainty, energy market imbalances and rising interest rates, global GDP is growing by just over 3 per cent a year. We marginally raise our growth forecast. Investment in areas including AI, defence and energy, an improving manufacturing cycle and stable labour markets provide support. At the same time, already downbeat households face rising borrowing costs, higher inflation and growing stock market uncertainty, challenging the drivers of growth and casting doubt on the strength of the expansion. So far, the rise in inflation has mainly been driven by high energy prices. The longer energy market imbalances persist, the greater the risk of spillovers to other parts of the economy. Inflation concerns will prompt the ECB and the Fed to raise rates once or twice more before cutting towards the end of the forecast period. We raise our Swedish GDP forecast for this year but see increasing headwinds from energy prices and interest rates next year. The Riksbank will raise its policy rate once more, to 2.25 per cent in March 2027, and keep it at that level throughout 2028.