Rating action

Scope Ratings GmbH (Scope) has today affirmed the Kingdom of Sweden’s long-term issuer and senior unsecured debt ratings at AAA in both local and foreign currency and maintained the Stable Outlook. The short-term issuer rating has been affirmed at S-1+ in both local and foreign currency with Stable Outlook.

The affirmation of Sweden’s credit ratings reflects the country’s wealthy and diversified economy, that has shown resilience through recent crises. The low level of public debt and a strong fiscal framework, including a general government balanced budget target and debt anchor at 35% of GDP, are key credit strengths. Moreover, Sweden’s strong external position underpinned by sustained current account surpluses, a net creditor position, and substantial foreign reserves, provides a strong buffer against external shocks and supports macroeconomic stability.

The main credit challenges relate to i) financial stability risks, including from high levels of household and corporate debt; and ii) persistent vulnerabilities in the housing market.

For the updated rating report, click here.

 Key rating drivers

Wealthy, diversified and resilient economy, despite a recent slowdown in recovery. The Swedish economy rebounded in 2024 from a 0.2% real GDP contraction in 2023. The downturn was mostly driven by a slowdown in consumption and investments amid the sharp rise in interest rates following the inflationary pressures amplified by the Russia-Ukraine war. As a result, household purchasing power weakened as subdued wage growth failed to offset the significant increase in mortgage costs.

Easing inflation, falling interest rates, and rising real wages supported a recovery in private consumption, contributing to a moderate pickup in economic activity in 2024, with real GDP expanding by 1%. While a continuous decline in inflation, lower interest rates and more expansionary fiscal policy will continue to support economic activity, heightened and prolonged uncertainties in global trade are likely to slow down the gradual recovery of the Swedish economy this year. Direct trade links with the US are limited, given the well-diversified base of export partners. Good exports to the US, mostly consisting of pharmaceuticals, machinery and motor vehicles, accounted for only 2.9% of GDP and 5.5% of total exports in 2024, mitigating the impact of higher US import tariffs¹. Nevertheless, the elevated uncertainty in global trade policy inhibits households’ consumption and businesses’ propensity to invest.

Scope expects a moderate increase in real GDP growth to 1.2% in 2025, before accelerating to 2.2% in 2026. The slower-than-expected recovery in economic activity will also be reflected in weaker developments in the labour market, with periodic fluctuations in the labour force, stagnating employment and unemployment rate likely to remain above 8% both in 2025 and 2026.

CPI inflation averaged 2.9% in 2024, declining from 8.6% in 2023 and continued to decelerate in the first six months of this year, remaining around or below 1%. Core CPI inflation (which excludes mortgage interest rate costs, energy and unprocessed food) has accelerated at the beginning of 2025 and reached 3.3% in June, amid temporary upward pressures on some services, process food and other good prices, as well as higher wage growth. Scope expects CPI inflation to average 2.2% in 2025, before falling below the target at 1.5% in 2026, supported by the prospects of a strengthening of the Krona. This could allow for additional monetary stimulus in the form of further interest rate cuts and create favourable conditions for expansionary fiscal policy.

Strong fiscal framework, low public debt ratio and ample fiscal space. The AAA rating is further supported by Sweden’s strong fiscal framework. This has been revised in 2024, with a shift in the target for net lending from a surplus of 0.33% of GDP to a balance on average over a business cycle, while the debt anchor has remained unchanged at 35% (+/- 5%). In Scope’s view, a lower target for net lending will enhance Sweden’s fiscal flexibility, enabling the country to manage effectively potential economic shocks, while maintaining safety margins, comply with the EU fiscal policy rules and ensuring a sustainable debt-to-GDP trajectory.

Following years of fiscal restraint amid a high-inflation environment, the 2025 Budget Bill marked a shift toward moderately expansionary fiscal policy—a stance the government is expected to maintain over the medium term. This year’s budget introduced unfunded policy measures for SEK 60bn – accounting for around 1% of GDP when also including SEK 11.5bn additional investments introduced with the Spring Amending Budget – and SEK 67bn in 2026 (0.9% of GDP). The majority of these policies are focused on reducing the tax burden and increasing expenditure for defence, housing, healthcare, labour market and education initiatives to tackle the high unemployment rate and skill shortages. Regarding military spending, Sweden committed to reach 3.5% of GDP by 2030, up from 2.2% of GDP in 2024. The defence effort currently falls within the fiscal policy framework, complying with both its expenditure ceiling and balanced budget target and will be financed via larger government borrowings².

Scope expects that increasing spending pressures combined with potentially lower tax revenues amid subdued economic recovery and tax cuts will result in moderate headline fiscal deficits of 1.4% of GDP in 2026 and 1.2% in 2026, before gradually converging towards a balanced budget by 2030. Scope also projects the debt-to-GDP ratio to rise from 33.5% in 2024 to 34.6% this year, peaking at 35.1% in 2026, before declining to 32.6% in 2030. Sweden’s public debt level will therefore remain one of the lowest among EU member states and AAA-rated peers.

Robust external position including consistent current account surpluses, lower external debt and high official reserves. Sweden’s open, diversified economy has benefited from current account surpluses over the last two decades, supporting its net external creditor position. At the same time, a stable level of international reserves provides a buffer against short-term external shocks shields the country from short-term shocks.

The current account surplus increased from 6% of GDP in Q4 2024 to 6.5% in Q1 2025, mainly supported by a net increase in primary income. The IMF projects the current account balance to stabilise around 5% of GDP in the medium term, remaining higher than the pre-Covid level of around 3.2% in 2015-19.

Sweden’s external debt stood at 169% of GDP in Q1 2025, declining from 184.3% of GDP in the same quarter last year and remaining well below 2009 levels of around 200% of GDP. External debt is mainly related to financial institutions (60% of total external debt), intercompany lending (20%) and non-financial corporates (14%), while the central bank and government account for the remaining 5%. Sweden’s international reserves, amounting to 10% of GDP in May 2025, and the Krona’s regional safe haven status, provide a buffer against financial market volatility.

Official reserve assets averaged almost USD 44bn during the first five months of 2025 (6.9% of GDP), remaining broadly unchanged from 2024. Given Swedish banks’ high dependence on wholesale funding in foreign currency and the disruptions that can occur to such funding in times of financial distress, it is important for Sweden to maintain adequate levels of foreign reserves. Sweden’s net international investment position continued to improve steadily, reaching 52% of GDP in Q1 2025, up from 41.4% in 2024, reflecting continued current account surpluses and net valuation gains³.

Rating challenges: financial stability risks from high levels of household and corporate debt and persistent challenges in the housing market

Financial stability risks in Sweden have eased over the past year as the interest rate hiking cycle began to reverse. However, uncertainties persist around the potential for prolonged elevated rates and renewed macroeconomic volatility. Core vulnerabilities remain tied high levels of household and corporate indebtedness. Private sector debt stood at 249% of GDP in Q4 2024, below all-time highs of 275% in Q4 2022, but still the highest among Nordic economies. Household debt primarily relates to mortgage debt, accounting for more than 80% of total household loans from monetary financial institutions (MFIs). In addition, short-term fixation periods result in a relatively fast transmission of monetary policy, reflected in the declining consumption during the recent cycle of inflation and interest rate increase. Saving buffers accumulated during the pandemic, previously introduced macroprudential measures and a strong labour market have, however, supported households’ resilience during the recent economic slowdown. Real wage increases and tax cuts are likely to contribute positively to households’ income and their ability to service debt going forward. Nevertheless, real wages are still lower than before the uptick in inflation and interest rates, leaving households vulnerable to shocks⁴. Risks related to high indebtedness are further alleviated by Swedish households’ significant financial assets, with a net worth of around 640% of net disposable income as of 2023. A large share of household financial assets is, however, invested in stocks, mutual funds, insurance and pension savings, therefore directly exposed to shocks and volatility in the housing market.

Non-financial corporates account for around two-thirds of the private sector debt. Financing conditions for property companies have improved as interest rates have started to decline and some of them have been able to return to the bond market. Nevertheless, vulnerabilities in the sector persist, mostly due to the large share of property companies’ corporate bonds owned by corporate bond funds. In times of stress, corporate bond funds tend to be susceptible to large investor redemptions. Moreover, property companies’ significant debt levels, a weak demand in the rental market, short interest rate fixation periods and debt maturities could adversely impact property values in case of sharp deterioration in economic activity and rise in interest rates. After material downward revisions in 2022 and 2023, commercial property values have stabilized again. Finally, major Swedish banks have remained resilient during the recent crisis, thanks to historically high profitability and comfortable capital buffers which reinforced their ability to withstand any uncertainties.

Risks of severe house price correction have subsided in the last year as prices have remained relatively stable according to the Booli Index, following significant declines in 2022. Since the first half of 2024 house prices have started to recover amid the decline in interest rates and gradual recovery in economic output. In the first six months of 2025 prices for apartments were up around 3% on average compared to the previous year, while house prices were up by 1.8%. However, vulnerabilities persist due to the high-interest rate sensitivity of household mortgages and elevated leverage among property companies, particularly those invested in commercial real estate. Sweden’s highly interconnected financial system compounds these risks, as large banks fund mortgage lending through covered bonds widely held by insurance firms, pension funds, and other banks.

Some of these vulnerabilities could be reduced through structural reforms including a broad review of housing and tax policy, as well as improved transparency around property valuations.

Structural reforms such as a comprehensive review of housing and tax policy and improved transparency in property valuations will become increasingly important to mitigate systemic vulnerabilities, particularly as demographic shifts, including population ageing and urbanization, are likely to place additional pressure on the housing market and public finances.

Rating-change drivers

The Stable Outlook reflects Scope’s view that the risks Sweden faces over the next 12 to 18 months are balanced.

Downside scenarios for the rating and Outlooks are if (individually or collectively):

1. The fiscal outlook deteriorated significantly, resulting in a sharp increase in public debt; and/or
    
2. There is a significant deterioration in the economic outlook, for example resulting from a sharp correction in the housing market.

Sovereign Quantitative Model (SQM) and Qualitative Scorecard (QS)

Scope’s SQM, which assesses core sovereign credit fundamentals, signals a first indicative credit rating of ‘aaa’ for Sweden. Under Scope’s methodology, this initial indicative rating receives: i) no further adjustment from the methodological reserve-currency adjustment; and ii) no negative adjustment from the methodological political-risk quantitative adjustment. On such a basis, a final SQM quantitative rating of ‘aaa’ is assigned for Sweden and reviewed by the Qualitative Scorecard (QS) where this rating can be adjusted by up to three notches up or down depending on the significance of Sweden’s qualitative credit strengths or weaknesses compared against an SQM-assigned peer group of sovereigns.

Scope identified the following relative credit strengths of Sweden via the QS: i) macroeconomic stability and sustainability; ii) fiscal policy framework; iii) resilience to short-term shocks; and iv) environmental factors. Conversely, the following QS relative credit weakness of Sweden was identified against the sovereign’s peer group: i) financial imbalances. On aggregate, the QS generates a one-notch positive adjustment for Sweden’s credit rating, concluding in final AAA long-term issuer ratings.

A rating committee has discussed and confirmed these results.

Environment, social and governance (ESG) factors

Scope explicitly factors in ESG issues in its ratings process via the sovereign-rating methodology’s stand-alone ESG sovereign-risk pillar, which holds a significant 25% weight under the quantitative model (SQM) and 20% weight under the methodology’s qualitative overlay (QS).

Environmental factors are explicitly considered in the rating process via the environment sub-category under the ESG risk pillar. Sweden receives high scores in the SQM indicators measuring CO2 emissions per GDP, the exposure and vulnerability to natural disaster risks, and the ecological footprint of consumption compared with available biocapacity. In line with other advanced economies, the country receives a lower score for the SQM indicator measuring greenhouse gas (GHG) emissions per capita, although this is still one of the highest scores among highly rated peers. The country aims to meet 100% of its electricity needs from renewable sources by 2040 and become a net-zero economy by 2045, ahead of the EU’s 2050 target. According to the Climate Policy Council of Sweden⁵, however, policies need to be further strengthened in order to achieve the ambitious neutrality target in 2045. Sweden was one of the first countries to implement a carbon tax (in 1991) and imposed around EUR 134 per tonne in 2025, among the highest levels worldwide, although still applied to a limited share of emitting sectors. These factors drive Scope’s assessment for ‘environmental factors’ at ‘Strong’.

Despite a stable working-age population and strong welfare institutions, Sweden faces rising social risks linked to demographic change. An increasing old-age dependency ratio is expected to weigh on public finances and the welfare system. Labour market integration challenges persist, particularly for low-skilled and foreign-born workers, despite past progress. Tighter immigration policies reflect growing political and social tensions, while the rise in organised crime underscores deeper structural integration issues, weighing on social cohesion.

Sweden benefits from the high quality of its institutions and a stable political environment despite past fragile government coalitions. The right-wing block including the Moderates, Sweden Democrats, Christian Democrats and Liberals secured a narrow majority in September 2022 general elections. The Moderates’ leader Ulf Kristersson subsequently formed a minority coalition government with the Christian Democrats and the Liberals. The anti-immigration Sweden Democrats, which emerged as the largest right-wing party, are not an official member of the government, but are backing the government in return for a tougher immigration stance.

Rating committee
The main points discussed by the rating committee were: i) domestic economic risk; ii) public finance risks, including fiscal framework and debt dynamics; iii) external risks; iv) financial stability risks, including housing market and private sector debt; v) ESG considerations; and vi) peer developments.

Rating driver references
1. Sveriges Riksbank
2. Riksgälden
3. IMF
4. Sveriges Riksbank 
5. Climate Policy Council of Sweden

Methodology
The methodology used for these Credit Ratings and/or Outlooks, (Sovereign Ratings Methodology, 29 January 2025), is available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
The model used for these Credit Ratings and Outlooks is (Sovereign Quantitative Model Version 4.0), available in Scope Ratings’ list of models, published under https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in ‘Rating Definitions – Credit Ratings, Ancillary and Other Services’, published on https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at https://scoperatings.com/governance-and-policies/regulatory/eu-regulation. Also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Guidance and information on how environmental, social or governance factors (ESG factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
The Outlook indicates the most likely direction of the Credit Ratings if the Credit Ratings were to change within the next 12 to 18 months.

Solicitation, key sources and quality of information
The Credit Ratings were not requested by the Rated Entity or its Related Third Parties. The Credit Rating process was conducted:
With Rated Entity or Related Third Party participation   YES
With access to internal documents                                 NO
With access to management                                          YES
The following substantially material sources of information were used to prepare the Credit Ratings: public domain and Scope Ratings’ internal sources.
Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting these Credit Ratings originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Ratings and Outlooks and the principal grounds on which the Credit Ratings and Outlooks are based. Following that review, the Credit Ratings and Outlooks were not amended before being issued.

Regulatory disclosures
These Credit Ratings and Outlooks are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings and Outlooks are UK-endorsed.
Lead analyst: Alessandra Poli, Analyst
Person responsible for approval of the Credit Ratings: Jakob Suwalski, Executive Director
The Credit Ratings/Outlooks were first released by Scope Ratings on January 2003. The Credit Ratings/Outlooks were last updated on 23 August 2024.

Potential conflicts
See www.scoperatings.com under Governance & Policies/Regulatory for a list of potential conflicts of interest disclosures related to the issuance of Credit Ratings, as well as a list of Ancillary Services and certain non-Credit Rating Agency services provided to Rated Entities and/or Related Third Parties.

Conditions of use / exclusion of liability
© 2025 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Fund Analysis GmbH, Scope Innovation Lab GmbH and Scope ESG Analysis GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5, D-10785 Berlin. Public Ratings are generally accessible to the public. Subscription Ratings and Private Ratings are confidential and may not be shared with any unauthorised third party.