Stockholm, Nov 1 (IANS): Sweden's economy is heading for a "grim winter", says Finance Minister Elisabeth Svantesson.

"We don't know yet how cold and grim it will be," Xinhua news agency quoted Svantesson as saying at a press conference here on Monday.

The government expects Sweden's gross domestic product (GDP) to shrink by 0.4 per cent next year, while inflation could be as high as 5.9 per cent.

The unemployment rate is also projected to increase.

Svantesson said that "it is important that the Swedish policy is well-balanced both in relation to the need to bring down the high inflation and to be able to handle the downturn in the economy".

Commenting on the projected slump in GDP, she said that Sweden, being a small country, is affected by the economies of its trading partners.

By way of example, she mentioned Germany, which "has big problems".

"The high unemployment rate is problematic and as we are now facing a recession more people will be left outside (the job market)," the Minister said.

The government's outlook is broadly in line with what the National Institute of Economic Research (NIER) said in a report in September.

According to the report, Sweden's central bank is also expected to increase the policy rate from 1.75 per cent now to 2.3 per cent throughout 2023.

The country's consumers are also gloomy about the year ahead.

The consumer confidence indicator fell to a record-low level of 49.7 points in September. This was considerably lower than the 110 points recorded in the summer of 2021.

Among retailers, the confidence indicator also decreased, from 91.3 points in August to 81.7 points in September.

The government will present its budget next week.