Sweden flag Sweden: Economic and Political Overview

The economic context of Sweden

Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Despite Sweden's exposure to global trade dynamics, Covid-19 has had a rather limited impact on its economy compared with most other European countries. In 2021, the continued rebound of consumption and investment contributed to an estimated growth of 4% (with the economy returning to its pre-pandemic level by the third quarter of the year). GDP growth is projected to reach 3.4% in 2022, before easing to 2.8% as the post-pandemic catch-up dissipates, with private consumption as the main growth driver (IMF).

Sweden is among rare advanced economies to show both a current account surplus and low public debt in Europe. Monetary and fiscal policies have been supportive since the outbreak of the pandemic, hence the government budget turned negative (-2.4% of GDP in 2021). The 2022 budget increases spending by SEK 74 billion (1.5% of GDP), and includes tax cuts for low-income earners and grants to municipalities to fight the pandemic. A rise in revenues and increased GDP will balance these expenses so that the IMF forecasts the deficit to gradually decrease to -0.7% this year and -0.2% in 2023 (grants from the EU Recovery and Resilience Facility should total around 0.2% of GDP in 2022 and 2023). The country’s debt-to-GDP ratio, although still low, reached 39.6% in 2021, from a pre-pandemic level of 34.9%, and is expected to gradually decrease over the forecast horizon (39.9% and 39% in 2022 and 2023, respectively). Driven largely by higher energy costs, inflation stood at 2% in 2021 but is projected to fall below Riksbank’s 2% target this year (1.6%).

Job creation was impacted by Covid-19 as the services industry slowed activity even when Sweden opted against nationwide lockdowns. The government's compensation schemes limited further unemployment, which was estimated at 8.9% in 2021 by the IMF, while wages, which are largely centrally negotiated, have increased only slightly faster than before the pandemic. The rate is projected to decrease to 7.9% this year and 7.7% in 2023. Overall, Swedish citizens enjoy a high per capita GDP of USD 55,566 (PPP – 2021), 18.5% higher than the EU’s average (USD 46,888), and the European Anti-Poverty Network (EAPN) estimates that only 2% of Sweden’s population lives in serious material poverty conditions.

 
Main Indicators 201920202021 (e)2022 (e)2023 (e)
GDP (billions USD) 533.88e541.06e622.37660.92711.24
GDP (Constant Prices, Annual % Change) 2.0e-2.84.03.42.8
GDP per Capita (USD) 51,69452,129e58,63961,68165,770
General Government Balance (in % of GDP) -0.4-2.6-2.4-0.7-0.2
General Government Gross Debt (in % of GDP) 34.937.3e39.639.939.0
Inflation Rate (%) 1.70.72.74.82.2
Unemployment Rate (% of the Labour Force) 6.88.38.97.97.7
Current Account (billions USD) 29.1630.9029.8528.4826.87
Current Account (in % of GDP) 5.55.7e4.84.33.8

Source: IMF – World Economic Outlook Database, October 2021

Note: (e) Estimated Data

Main Sectors of Industry

Agriculture represents 1.4% of the GDP and employs 1.7% of the workforce (World Bank, latest data available). The main agricultural products are grains (particularly oats, wheat, barley, and rye), potatoes and other root crops, vegetables, and fruits, as well as dairy products, meat and wood. While production exceeds domestic consumption, a significant amount of food needs to be imported due to a lack of crop variety. Sweden has a wealth of natural resources: forests, iron, lead, copper, zinc and hydroelectric energy. The country has 3,021 thousand hectares of agricultural area and 27,980 thousand hectares of forest area (FAO), with a total of 62,937 agricultural holdings (Statistics Sweden, latest data available).

The industrial sector contributes 21.1% of GDP and employs 18.4% of the workforce. It is dominated by groups such as Volvo, Saab, Ericsson, ABB, AstraZeneca, Electrolux, Ikea, H&M, etc. Sweden's main manufacturing activities are steel, automotive, chemical, forestry, industrial machinery and equipment, automation and food processing equipment. The World Bank estimates that the manufacturing sector alone accounts for 12.1% of GDP. The new technologies and biotechnologies sectors are also of significant importance in the economy.

The tertiary sector, driven by telecommunications and IT equipment, employs 79.9% of the active workforce and contributes 76.1% of GDP. The banking sector is comprised of a total of 121 banks, including 42 commercial banks, 32 foreign banks, 45 savings banks and two co-operative banks (European Banking Federation). Before the pandemic, the travel and tourism industry was estimated to account for 9.7% of the country’s GDP; however, the sector was severely affected by the consequences of the pandemic.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 1.7 18.4 79.9
Value Added (in % of GDP) 1.4 21.1 66.1
Value Added (Annual % Change) 1.1 -3.6 -3.0

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.

 

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Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

Score:
74,7/100
World Rank:
21
Regional Rank:
12

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 

Business environment ranking

Definition:

The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

Score:
8.40/10
World Rank:
4/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024

 

Country Risk

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Latest Update: June 2022

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