Sweden's economy shrank in the first three months of the year, preliminary figures from the statistics office showed on Monday, continuing a dismal run that has seen gross domestic product shrink for four quarters in a row.

GDP contracted 0.1% in the first quarter versus the previous quarter, while compared to the same quarter a year earlier, gross domestic product was down 1.1%.

In March alone, GDP contracted 0.3%, the data showed.

The Statistics Office provides no breakdown of the flash figures which are likely to be revised when final figures are published at the end of May.

Analysts had forecast the economy would expand 0.2% from the previous quarter.

"The outcome shows that the economy remains weak, while the inflationary pressure from wage growth is limited," Swedbank said in a note. "At next week's monetary policy meeting, we expect the Riksbank to cut the policy rate to 3.75% and to signal further rate cuts later this year."

Separate figures showed retail sales fell 0.4% in March from February.

Sweden's economy slowed sharply last year as a result of a series of rate hikes by the central bank aimed at reining in surging inflation, which peaked at over 10% at the end of 2022. Inflation is now under control and the central bank said at its most recent meeting in March it could start cutting rates in either May or June if inflation continued to fall back toward the 2% target.

The government also promised more spending in its spring budget and most analysts expect growth to pick up slightly this year, after the economy shrank 0.2% in 2023.

The government expects the economy to expand 0.7% in 2024 before picking up further speed in 2025, when the budget is likely to be even more generous and rates are expected to fall further.


(Reporting by Simon Johnson, editing by Louise Rasmussen and Christina Fincher)