STOCKHOLM (Reuters) - Sweden's economy will slow this year with headline inflation expected to run at its highest level since the early 1990s, the government said in a pre-budget forecast on Friday.
The government revised down its forecast for growth this year to 3.1% from the 3.4% it saw in December. Headline inflation was seen averaging at 4.6%, up from 2.1% expected in December.
"Russia's invasion of Ukraine brings with it rising prices, a great deal of uncertainty and lower trade," Finance Minister Mikael Damberg told reporters. "Sweden will be affected by the war in Ukraine through lower growth and higher price rises."
Earlier this week, the NIER think tank forecast growth in 2022 of 3.3% and inflation at 5.2% for the year.
Headline inflation was 4.5% in February, measured against the same month in 2021.
Sweden's economy bounced back quickly from the pandemic and despite Russia's invasion of Ukraine is expected to remain relatively strong.
However, surging inflation has forced the government into measures to ease the impact of higher energy and fuel prices on consumers and bring forward defence spending.
The war, which Russia calls a "special military operation", has also forced millions to flee Ukraine and the government has set aside nearly 10 billion crowns ($1.07 billion) in the upcoming mini-budget to provide housing and other services for refugees who reach Sweden.
The government will publish its spring mini-budget on April 19.