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In 2025, Sweden shows clear signs of economic recovery following the recession that began in 2023. Improving consumer confidence and rising domestic demand are driving renewed growth, although persistent labor market weakness continues to weigh on the broader outlook.
Economic recovery gains momentum
According to the European Commission, Sweden’s GDP is expected to grow by 1.5% in 2025. This marks a return to moderate expansion, largely supported by stronger domestic demand and a gradual rebound in household consumption. Stabilizing financial conditions have helped restore confidence after a prolonged period of economic contraction.
High unemployment remains a challenge
Despite the recovery, unemployment in Sweden is forecast to remain elevated at around 9%. This highlights ongoing structural challenges within the labor market that are not easily resolved by cyclical growth alone. Youth unemployment and the integration of migrants into the workforce remain particularly pressing issues.
Fiscal policy supporting the upturn
Government policy continues to play a central role in sustaining the recovery. Sweden’s budget deficit is expected to widen to 1.7% of GDP in 2025 as authorities maintain supportive measures aimed at boosting demand and employment. While this approach helps cushion social impacts, it also requires careful management to preserve long-term fiscal discipline.
Productivity and the welfare model
Sweden remains one of the world’s highest-ranking countries in terms of living standards. Life expectancy is approaching 83 years, reflecting strong healthcare and social systems. However, maintaining a generous welfare state over the long term will depend on improving labor productivity and expanding workforce participation.
As reported by International Investment experts, Sweden in 2025 is firmly on a recovery path following recession, but high unemployment continues to limit the strength of the rebound. The country’s long-term prospects will depend on raising productivity and successfully integrating young people and migrants into the labor market while preserving its social welfare model.