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Economy of Sweden

From Academic Kids

Sweden is an industrialized country. Agriculture, once accounting for nearly all of Sweden's economy, now employs less than 3% 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.

Contents

Overcoming the 1990s crisis

The Swedish economic picture has brightened significantly since the severe recession in the early 1990s. Growth has been strong in recent years, and even though the economy slackened during the first half of 2001, the long-run prospects for growth remain favorable. The inflation rate is low and stable, with projections for continued low levels over the next 2-3 years. Since the mid-1990s the export sector has been booming, acting as the main engine for economic growth. Swedish exports also have proven to be surprisingly robust. A marked shift in the structure of the exports, where services, the IT industry, and telecommunications have taken over from traditional industries such as steel, paper, and pulp, has made the Swedish export sector less vulnerable to international fluctuations.

Government

The government budget has improved dramatically--from a record deficit of more than 12% of GDP in 1993 to an expected surplus of 8% of GDP in 2001. 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-ā-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%t of GDP in 1990 to 78% in 1994, stabilized around the middle of the 1990s and started to come down again more significantly beginning in 1999. In 2000 it fell below the key level of 60% and had declined to a level of 52% of GDP as of 2004.

Economic and Monetary Union

These figures show a quite remarkable improvement of the Swedish economy since the crisis in 1991-93, so that Sweden could easily qualify for membership in the third phase of the Economic and Monetary Union, making the euro its national currency. In theory, by the rules of the EMU, Sweden is obliged to join, since the country has not obtained exception by any protocol or treaty (as opposed to Denmark and the United Kingdom). Nevertheless, the Swedish government decided in 1997 against joining the common currency from its start on January 1, 1999.

In the first years of the twenty-first century, a majority for joining emerged in the governing Social Democratic party, although the question was subject of heated debate, with leading personalities in the party on both sides. On September 14, 2003, a national referendum was held on the euro. A 55.9 percent majority of Swedes rejected the common currency, while 42.0 percent were in favour of it. Currently no plans for a new referendum or parliamentary vote on the matter are being discussed.

Unemployment

In contrast with most other European countries, Sweden maintained an unemployment rate around 2% or 3% of the work force throughout the 1980s. This was, however, accompanied by high and accelerating inflation. It became evident that such low unemployment rates were not sustainable, and in the severe crisis in the early 1990s the rate increased to more than 8%. In 1996 the government set out a goal of reducing unemployment to 4% by 2000. During 2000 employment rose by 90,000 persons, the greatest increase in 40 years, and the goal was reached in the autumn of 2000. The same autumn the government set out its new target--that 80% of the working age population will have a regular job by 2004. (The present employment ratio is 76%.) Achieving the employment target by 2004, however, will be difficult owing to a high proportion of disability pensioners, persons listed as chronically ill, and students. Some have expressed concern that meeting the employment target may come at a cost of too high a rate of wage increases.

Labor unions

Around eighty percent of the Swedish labor force is unionized. For most unions there is a counterpart employer's organization for businesses. The unions and employer organizations are independent of both the government and political parties, although the largest confederation of unions, the National Swedish Confederation of Trade Unions or LO (organising blue-collar workers), maintains close links to the largest political party, the Social Democrats.

Especially the unionization rate among white-collar workers is exceptionally high in Sweden - almost as high as for blue-collar workers. There are two major confederations organising professionals and other qualified employees: the Swedish Confederation of Professional Employees (Tjänstemännens Centralorganisation or TCO) and the Swedish Confederation of Professional Associations (Sveriges Akademikers Centralorganisation or SACO). They are both independent from Sweden's political parties and never endorse candidates for office in political elections.

There is no fixed minimum wage by legislation. Instead, minimum wages in different sectors are normally set by collective bargaining. Most labor contracts were re-negotiated during 2004, and call for wage increases of around seven percent over a three-year period.

Labor force

The traditionally low-wage differential has increased in recent years as a result of increased flexibility as the role of wage setting at the company level has strengthened somewhat. Still, Swedish unskilled employees are relatively well-paid while well-educated Swedish employees are low-paid compared to those in competitor countries. The average increases in real wages in recent years have been high by historical standards, in large part due to unforeseen price stability. Even so, nominal wages in recent years have been slightly above those in competitor countries. Thus, while private-sector wages rose by an average annual rate of 3.75% from 1998 to 2000 in Sweden, the comparable increase for the EU area was 1.75%. In the year 2000 the total labor force was approx. 4.4 million people.

Figures

MeasureValueYearPlacePer Capita
GDP$227.4 billion2002 est.33rd of 225$25,617.51
 19734th of 52$13,494.00
19508th of 52$6,738.00
190014th of 40$2,561.00
18209th of 24$1,198.00
Exports$80.6 billion2002 est.21st of 222$9,079.91
Imports$68.6 billion$7,728.06
Budget - revenues$119 billion2001 est.11th of 218$13,405.82
Budget - expenditures$110 billion$12,391.94
Debt - external$66.5 billion199415th of 192$7,491.49
Economic freedom1.9200412th of 156 

Gross Regional Product

Rank County Total¹ Per Capita² Share
1 Stockholm County 669 900 363 000 28.54%
2 Västra Götaland County 386 538 257 000 16.47%
3 Skåne County 278 254 244 000 11.85%
4 Östergötland County 97 387 236 000 4.15%
5 Jönköping County 79 761 243 000 3.40%
6 Uppsala County 69 631 234 000 2.97%
7 Dalarna County 62 604 226 000 2.67%
8 Västernorrland County 61 540 251 000 2.62%
9 Halland County 61 339 221 000 2.61%
10 Örebro County 61 203 224 000 2.61%
11 Gävleborg County 60 417 218 000 2.57%
12 Västmanland County 60 287 233 000 2.57%
13 Norrbotten County 59 875 236 000 2.55%
14 Värmland County 59 497 217 000 2.53%
15 Västerbotten County 55 534 218 000 2.37%
16 Kalmar County 53 381 227 000 2.27%
17 Södermanland County 52 235 202 000 2.23%
18 Kronoberg County 43 256 245 000 1.84%
19 Blekinge County 34 566 231 000 1.47%
20 Jämtland County 27 628 215 000 1.18%
21 Gotland County 12 154 212 000 0.52%
  Extra regional 413   0.02%
  Totalt 2 347 400 263 100.00%
1/ Million SEK
2/ SEK
Source: Statistics Sweden (2004)

See also

References

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