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World > Europe > Sweden > Economy (Notes)

Sweden - Economy (Notes)


ECONOMY
Sweden is a highly industrialized country. Agriculture, once accounting for nearly all of Sweden's economy, now employs less than 2% of the labor force. Extensive forests, rich iron ore deposits, and hydroelectric power are the natural resources which, through the application of technology and efficient organization, have enabled Sweden to become a leading producing and exporting nation.

The Swedish economic picture has brightened significantly since the severe recession in the early 1990s. Growth has been strong in recent years, with an annual average GDP growth rate of 2.5% for the period 2000-2004 and 2.7% in 2005. The inflation rate is low, with an annual average inflation rate of about 1.5% for 2006, but unemployment remains a stubborn problem. The unemployment rate held steady in recent years at about 5% and in 2005 reached 7.8%. Since the mid-1990s, Sweden's export sector has grown significantly as the information technology (IT) industry, telecommunications, and services have overtaken traditional industries such as steel, paper, and pulp. The overall current-account surplus has traditionally been much smaller than the merchandise trade balance, as Sweden has generally run a deficit on trade in services, net income flows, and unrequited transfers. However, since 2003 this has not been the case, as the services balance swung into surplus in 2003 and improved further in 2004 and 2005. In addition, the income account also swung from deficit into surplus in 2003, before slipping back to register small deficits in 2004 and 2005. Although the transfers balance remained in deficit, mainly as a result of Sweden's contributions to the EU budget, the overall current-account surplus was larger than the trade surplus in 2003-05. Most categories of services exports produced an improvement over this period, but the biggest contribution came from business services exports, followed by transportation and royalties and license fees.

During 2005 real GDP rose by 2.7% and expanded by 3.4% in 2006. The government budget improved dramatically from a record deficit of more than 12% of GDP in 1993 to a surplus of 2.7% of GDP in 2005. The new, strict budget process with spending ceilings set by parliament, and a constitutional change to an independent Central Bank, have greatly improved policy credibility. This can be seen in the long-term interest rate margin versus the Euro, which is negligible. From the perspective of longer-term fiscal sustainability, the long-awaited reform of old-age pensions entered into force in 1999. This entails a far more robust system vis--vis adverse demographic and economic trends, which should keep the ratio of total pension disbursements to the aggregate wage bill close to 20% in the decades ahead. Taken together, both fiscal consolidation and pension reform have brought public finances back on a sustainable footing. Gross public debt, which jumped from 43% of GDP in 1990 to 78% in 1994, stabilized around the middle of the 1990s and has been decreasing in recent years. In 2005 public debt was about 50.3% of GDP. These figures show excellent improvement of the Swedish economy since the crisis of the early 1990s.

Eighty percent of the Swedish labor force is unionized. For most unions there is a counterpart employers' organization for businesses. The unions and employer organizations are independent of both the government and political parties, although the largest federation of unions, the National Swedish Confederation of Trade Unions (LO), always has maintained close links to the largest political party, the Social Democrats. There is no fixed minimum wage by legislation. Instead, wages are set by collective bargaining.

U.S. direct investment in Sweden in 2004 was approximately $2.6 billion. There were major investments in computer software and hardware, IT/telecommunications, industrial goods, and health care.


Facts at a Glance: Geography - People - Government - Economy - Communications - Transportation - Military - Climate - Current Time - Ranking Positions - Swedish Krona Exchange Rates
Notes and Commentary: People - Economy - Government and Political Conditions - Historical Highlights - Foreign Relations - Relations with U.S.



Facts at a Glance
Geography
People
Government
Economy
Communications
Transportation
Military
Climate
Current Time
Ranking Positions
Swedish Krona Exchange Rates


Notes and Commentary
People
Economy
Government and Political Conditions
Historical Highlights
Foreign Relations
Relations with U.S.





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