The EPI grades Sweden’s current economic performance at a B level, with the EPI score projected to be 93.6% in 2016. Structural problems in the labor and housing markets remain the major obstacles to faster economic development.

Benefitting from supportive policies bolstering domestic demand, GDP growth of about 3% is expected to continue into 2016. Exports are also expected to pick up, but risks of export decrease are related to trading partner demand, including the euro area, emerging markets, and Nordic neighbors. Inflation has picked up but remains below the 2% target. Fiscal policy is expected to be neutral over 2015-16, with government budget deficit projected to be below 1%.

Structural problems in labor and housing markets are major road blocks to growth, while the low skilled and foreign born are a rising portion of the unemployed and the lack of affordable housing in the major cities also undermines labor mobility. Housing prices are rising fast from elevated levels, resulting in households taking on higher debt burdens and making the economy more vulnerable to shocks.

The 5-Minute Economist projects Sweden’s EPI score to gradually recover to 94% or a B+ level by 2020.