Although Sweden's economy surged temporarily in the first quarter, momentum in external and domestic demand is not strong enough to pull the economy out of stagnation, the National Institute of Economic Research said in a quarterly report on Wednesday.
According to think-tank, recovery will not begin until the autumn, and the output gap will not close until 2017.
Nonetheless, the institute raised the economic outlook for 2013 to 1.5 percent, from 1.3 percent estimated in March, and that for 2014 to 2.5 percent from 2.3 percent.
Rising real disposable income, and household consumption will lift demand next year, it said. Moreover, exports are forecast to make a greater contribution to the recovery.
The jobless rate is forecast to remain at 8.3 percent this year and next, before falling to 7.7 percent in 2015.
Further, the think-tank assessed that tax rises will be needed to achieve the 1 percent surplus target.
Consumer price inflation is expected to fall to 0.1 percent this year. Then it will rise to 0.8 percent next year. The NIER does not expect the repo rate to be lowered in July.
However, the institute said the NIER does see a case for cutting the repo rate again before the autumn to accelerate recovery and help push up inflation more quickly.
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