December 19, 2017 / 11:27 AM / a year ago

UPDATE 1-Sweden sees faster growth next year, housing market a risk

* GDP seen up 2.5 pct in 2017, 2.8 pct 2018

* Housing market crimped by mortgage rules and supply

* Minister says does not expect big fall in house prices (Adds finance minister comment)

STOCKHOLM, Dec 19 (Reuters) - The Swedish economy will grow faster than previously expected next year, but the housing market is a risk, the government said in a fresh forecast on Tuesday.

Sweden has enjoyed years of strong growth, fuelled by ultra-low borrowing costs, and property prices have boomed. But a surge in building and tougher mortgage rules have put a brake on the housing market and prices have dipped in recent months.

Most analysts see the downturn as a much-needed correction, not the start of a longer downturn. But a big fall in prices could spill over into construction, force households to cut back on spending and hit growth.

“This is a clear area of risk in the economy,” Finance Minister Magdalena Andersson said.

However, she pointed to robust conditions, including buoyant consumer sentiment and a continued shortage of homes as giving support to the market.

“It is impossible to predict exactly how prices will develop, but there are several factors that point to the fact that we do not face a big fall in prices ahead of us,” she said.

The economy is expected to grow 2.8 percent next year, up from the government’s forecast in September of 2.5 percent.

This year, growth is estimated at 2.5 percent, compared with the previous forecast of 3.1 percent and 3.2 percent in 2016.

Andersson said the lower forecast for 2017 was due to growth figures for 2015 and 2016 being revised higher, not a slowdown in the economy. (Reporting by Stockholm Newsroom; Editing by Niklas Pollard, Daniel Dickson and Alison Williams)

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