Stockholm, Nov 8 (IANS): Nordea, one of the largest banks in the Nordics, has sharply lowered its 2023 forecast for Sweden's gross domestic product (GDP) growth to minus 1.8 per cent from minus 0.5 per cent it made two months ago in Economic Outlook.

A weaker domestic development, dramatically tightened financial conditions with higher interest rates, and inflation that eats up purchasing power are reasons behind the adjustment, Xinhua news agency quoted the bank as saying.

"Our downward revision is mainly based on a weaker domestic economy. Financial conditions have tightened dramatically this year."

Nordea added that the effects of the rise in interest rates and high inflation will even continue in 2024 and "contribute to the weakness of the recovery".

The bank also said that Sweden's unemployment would rise to 8.1 per cent by the end of 2023, and home prices would plunge by 20 per cent.

It also expected the Swedish central bank, the Riksbank, to raise the policy rate by 75 basis points in November and by a further 25 basis points in February next year to peak at 2.75 per cent.

"The outlook for the Swedish economy is worrying," Nordea concluded, adding that "it will be a chilly winter".

Inflation keeps breaking records in Sweden, with the Consumer Price Index with fixed interest rate 12-month inflation hitting 9.7 per cent in September, the highest level in three decades.

To rein in inflation to its 2-per cent target, Riksbank has implemented a string of policy rate increases to today's 1.75 per cent.