Nordic Outlook: Tough policy dilemmas due to energy crisis

Because of accelerating inflation and rapid key interest rate hikes, the global economic outlook is deteriorating. We are adjusting our GDP forecasts sharply lower, especially for 2023, and expect GDP growth of only 0.9 per cent in advanced economies (the 38 OECD countries) – down from 2.3 per cent in our May forecast. Swedish GDP growth will be 0.0 per cent next year, yet the Riksbank will speed up its inflation-fighting pace and the repo rate will peak at 2.25 per cent early in 2023. Swedish households are being squeezed by falling real incomes, rising prices and doubled interest expenditures, and home prices will fall by 15-20 per cent.