We raise our global growth forecast by 0.1 percentage points for both 2026 and 2027 compared with the August issue of Nordic Outlook. The manufacturing cycle is improving, with global PMI comfortably above the 50 mark, while investment is benefiting from both cyclical and structural tailwinds from AI, defence and energy. One question is whether downbeat households can withstand the headwinds from higher inflation, high energy prices and rising interest rates. The same applies to residential construction, which is already weak in many countries.
“The global economy remains resilient, with substantial investment and stable labour markets sustaining growth. At the same time, geopolitical uncertainty, high energy prices and rising interest rates pose increasingly clear threats to the economic outlook, and downside risks are significant,” says SEB’s Chief Economist, Jens Magnusson.
The growth gap between the US and Europe is narrowing
US growth will reach nearly 2.5 per cent this year before slowing to just over 2 per cent in 2028. AI-related investment is supporting growth, but its high import content reduces its contribution to GDP. Consumption has been unexpectedly strong so far this year but will moderate somewhat as fiscal support fades. A low savings rate and positive wealth effects leave households sensitive to changes in stock market sentiment. The euro area has also surprised on the upside, albeit with growth at a lower level. Growth will accelerate from just over 1 per cent this year to nearly 1.5 per cent in 2028. Consumption and investment are driving the expansion, while exports face challenges from Chinese competition and higher tariffs. High energy prices, together with weak growth and political uncertainty in France, are weighing on the outlook. German fiscal initiatives targeting defence and investment provide support but are progressing somewhat more slowly than desirable. China’s economy continues to be driven by exports, with AI-related products playing an important role. Domestic demand remains weak, with a sluggish housing market and high household savings. Large trade surpluses are increasing tensions with the US and Europe.
“How effectively private and public investment translates into higher productivity, and profits will be crucial to the longer-term outlook. Questions remain about AI companies’ business models and future profitability. Competition from low-cost Chinese AI, political calls for temporary pauses in the AI buildout and rising interest rates are among the concerns. These are reflected not least in recent stock market uncertainty,” says SEB’s Head of Economic Forecasting, Daniel Bergvall.
Geopolitical tensions and conflicts persist
Energy prices are a key factor for growth and inflation. More crude oil is reaching the market from countries around the Persian Gulf, but concerns about renewed US attacks have periodically pushed prices higher. Europe faces a strained security environment and a large trade deficit with China. Global trade has continued to expand but has been reshaped by the trade war between the US and the rest of the world. The US midterm elections have been decided, but their economic and political implications remain uncertain.
“The Democrats’ victory in the midterm elections will not materially change either public finances or tariff policy. However, gridlock between the White House and Congress may lead the president to focus even more on foreign policy. Hopefully, this will bring us closer to a solution in the Middle East, but we cannot rule out escalating or new conflicts in the pursuit of a place in the history books,” says Jens Magnusson.
Inflation expected to return to target, but risks have increased
Energy prices are pushing up inflation, with increasing but limited indirect effects and no clear second-round effects. Stable pricing plans and long-term inflation expectations, together with slowing wage growth in the US and the euro area, suggest that the upturn will be temporary. Despite upward forecast revisions since August, core inflation is expected to reach target in 2028. Headline inflation is then expected to fall below target in many countries if energy prices decline as anticipated.
Policy rates set to rise a little further
Higher inflation and relatively solid growth in economies such as the US and the euro area have raised market expectations for central bank policy rates. Meanwhile, rising long-term yields have tightened financial conditions. We forecast one more Fed rate hike, in December this year. The ECB has two more hikes ahead: in December and in March 2027. The ECB is concerned about indirect inflation effects from energy, but the final hike may not materialise if energy prices start to decline. Once energy prices, and thus inflation, fall, lower policy rates are expected. However, cuts will not begin until the latter part of 2027 for the Fed and early 2028 for the ECB. The recent rise in interest rates further reduces the scope for managing high debt levels.
“A toxic combination of inflation risks, weak public finances and large private-sector borrowing needs is pushing up both short- and long-term interest rates. This could put pressure on households, businesses and countries alike and, over time, hold back growth,” says Jens Magnusson.
Sweden: Strong growth but headwinds for households
We raise our GDP forecast for 2026 from 2.7 to 3.0 per cent. However, we lower our 2027 forecast from 2.9 to 2.5 per cent, reflecting weaker consumption growth.
“The Swedish economy is in a phase of strong growth, with household consumption making a particularly substantial contribution. However, headwinds are now building, including from higher interest rates and energy prices, and we see some slowdown as we look towards next year,” says Daniel Bergvall.
Consumption to slow in 2027
Following very strong growth during the spring and summer, household consumption will face headwinds this winter from high energy prices and rising mortgage rates. Consumption growth is expected to slow from 3.0 per cent in 2026 to 2.3 per cent in 2027. Several support measures, including lower fuel taxes andIndustry takes over as the growth engine public transport subsidies, will also expire, further dampening consumption.
Industrial indicators have continued to improve and are very strong by international standards. The upturn is broad-based but is mainly driven by defence, telecommunications, pharmaceuticals, power generation and electricity transmission. Exports and investment will be the main drivers of growth in 2027.
Slow improvement in the labour market
Stronger growth is starting to have a positive impact on the labour market, but the recovery remains modest. Indicators suggest that this will continue over the next six months. Unemployment has begun to decline but remains high, while capacity utilisation indicators have improved only marginally from low levels. Trade unions’ wage demands ahead of the 2027 bargaining round are slightly lower than in 2025.
“Our forecasts, and those of the Riksbank, for wage growth of just over 3 per cent in both 2027 and 2028 look broadly on track,” says Daniel Bergvall.
Core inflation rises from low levels
Core inflation, measured by CPIF excluding energy, has been below target even after adjusting for the effects of the reduction in VAT on food and public transport subsidies. A slightly weaker krona and indirect effects from higher energy prices are expected to push CPIF excluding energy temporarily above target during 2027. At the same time, rising energy prices, partly reflecting a normalisation of fuel taxes, are expected to drive headline inflation temporarily to around 3 per cent in the first half of 2027. Both inflation measures are expected to decline towards target during 2028.
The Riksbank may need only one more hike
The Riksbank is expected to raise its policy rate to 2.25 per cent in March and then leave it unchanged at that level until the end of 2028. Stronger growth means that risks to our interest rate forecast are tilted to the upside.
“After three consecutive months of lower-than-expected core inflation, we have lowered our near-term inflation forecast. Lower-than-expected inflation and somewhat dovish signals from the Riksbank at its November meeting have led us to postpone our forecast for the next hike from February to March next year. We now believe this will be the only hike of the year,” says Jens Magnusson.
Fiscal policy is expected to become gradually more restrictive. Political gridlock makes the outlook highly uncertain and increases the likelihood of less expansionary fiscal policy as early as next year.
Key figures: International and Swedish economies August 2026 Nordic Outlook forecasts in parentheses
| International economy: GDP, annual percentage change | 2025 | 2026 | 2027 | 2028 |
| United States | 2.3 | 2.4 (2.2) | 2.3 (2.1) | 2.2 (2.1) |
| Euro area | 1.2 | 1.1 (0.9) | 1.3 (1.3) | 1.4 (1.5) |
| United Kingdom | 1.2 | 1.4 (1.1) | 1.2 (1.3) | 1.6 (1.6) |
| Japan | 1.1 | 0.8 (0.8) | 0.7 (0.7) | 0.7 (0.7) |
| OECD | 1.8 | 1.9 (1.8) | 1.9 (1.9) | 1.9 (1.9) |
| China | 5.0 | 4.6 (4.6) | 4.5 (4.5) | 4.4 (4.4) |
| Nordic countries | 1.7 | 2.5 (2.3) | 2.0 (2.0) | 1.6 (1.5) |
| Baltic countries | 2.4 | 2.7 (2.7) | 2.1 (2.2) | 2.5 (2.5) |
| World (PPP) | 3.5 | 3.2 (3.1) | 3.3 (3.2) | 3.3 (3.3) |
| Nordic and Baltic countries: GDP, annual percentage change | ||||
| Norway | 1.1 | 1.0 (1.3) | 0.7 (0.6) | 0.2 (0.2) |
| Denmark | 4.4 | 4.1 (3.5) | 3.0 (2.5) | 2.5 (2.5) |
| Finland | 0.8 | 1.6 (1.6) | 1.8 (1.4) | 1.5 (1.5) |
| Lithuania | 3.0 | 2.7 (3.0) | 2.1 (2.1) | 2.7 (2.7) |
| Latvia | 2.2 | 3.0 (2.3) | 2.0 (2.0) | 2.1 (2.1) |
| Estonia | 1.3 | 2.5 (2.5) | 2.2 (2.8) | 2.7 (2.7) |
| Swedish economy. Annual percentage change | ||||
| GDP, actual | 1.4 | 3.0 (2.7) | 2.5 (2.9) | 2.2 (2.0) |
| GDP, working-day adjusted | 1.6 | 2.8 (2.5) | 2.3 (2.7) | 2.4 (2.2) |
| Unemployment (%) (EU definition) | 8.9 | 8.7 (8.7) | 8.4 (8.4) | 7.8 (7.7) |
| CPI | 0.7 | 0.8 (0.6) | 3.1 (2.0) | 1.5 (2.0) |
| CPIF | 2.6 | 1.4 (1.2) | 2.2 (1.9) | 1.4 (1.8) |
| General government balance (% of GDP) | -1.6 | -2.4 (-2.4) | -2.2 (-2.2) | -1.8 (-1.8) |
| Policy rate (Dec) | 1.75 | 2.00 (1.75) | 2.25 (2.25) | 2.25 (2.25) |
| Exchange rate, EUR/SEK (Dec) | 10.83 | 10.95 (10.90) | 10.55 (10.40) | 10.30 (10.30) |