Record-high energy prices this coming winter, rising interest rates and inflation nearing 10 percent will hit Swedish households' purchasing power, leading to lower business sales and a severe slowdown in economic growth, the institute concluded in its latest economic forecast on Wednesday.

STOCKHOLM, Aug. 10 (Xinhua) -- The Swedish National Institute of Economic Research slashed the country's economic growth prediction for next year to 0.5 percent on Wednesday, citing the influence of inflation and interest rate hikes.

In March, the institute had expected Sweden's economy to grow at 2.1 percent next year, but lowered the forecast to 1.2 percent in June.

Record-high energy prices this coming winter, rising interest rates and inflation nearing 10 percent will hit Swedish households' purchasing power, leading to lower business sales and a severe slowdown in economic growth, the institute concluded in its latest economic forecast on Wednesday.

The current situation is tough, though not the toughest in recent decades, said Ylva Heden Westerdahl, head of the institute's forecasting department, at a news conference Wednesday. "We don't expect the sort of economic slowdown that we saw during the financial crisis or the pandemic, where unemployment rose much more."

A shortage of natural gas in Europe this coming winter will push electricity prices in Sweden to twice the level of last winter, she said. Meanwhile, Sweden's central bank was expected to raise its policy interest rate to 2 percent, and Sweden's unemployment rate would rise slightly from 7.7 percent this year to 7.8 percent next year, 0.3 percentage points higher than the institute's previous forecast.

Swedish Finance Minister Mikael Damberg told Swedish Television that he agreed with the institute's forecast, and that Sweden was in a more difficult period as high inflation would severely hit household consumption and make people's lives harder.

According to data released by Statistics Sweden last month, inflation rate reached 8.5 percent in June, the highest since December 1991 for the fourth consecutive month.

To curb inflation, Sweden's central bank raised its policy interest rate from 0.25 percent to 0.75 percent as of July 6, and expected to raise it further to just under 2 percent by early 2023.