Handelsbanken has called for Sweden's central bank to act after its latest Global Macro Forecast pointed to a recession hitting the country after indicators suggesting the local economy is increasingly being affected by the broader global economic slowdown.
This comes after a period in which Sweden seemed to have resisted the global slowdown, but which is now showing up in industry sector figures in particular.
Christina Nyman, chief economist, said: "The downturn is clear, and in this situation we expect the Riksbank to decide not to hike the repo rate. In such an environment, unemployment increases. The alarm signals from the latest unemployment figures are probably exaggerated, but we still expect the labour market to weaken."
Household consumption has been the key support to ongoing GDP growth, but the bank predicts slower income growth, which would lead households to trim their spending. Some 2.8 million working Swedes will be affected by collective wage bargaining and agreements that typically will take place through the winter.
"In historical terms, we expect wages in the agreements to remain low," said Nyman.
Globally, uncertainty is being fed by the US-China trade war, Brexit, and concerns that central banks lack the ammunition to prevent continued economic slowdown. Handelsbanken believes that "most factors suggest that the fiscal stimulus measures will be insufficient; in this situation, there are substantial risks to a small, open economy such as Sweden's."