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Economy of Sweden

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.

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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--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 is expected to be eliminated within a few years.

European 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 European Monetary Union. The government, however, decided for largely domestic political reasons that Sweden would not enter into the EMU from its start on January 1, 1999, but would keep its options open for entry at a later date.

Unemployment In contrast with most other European countries, Sweden maintained an unemployment rate around 2% or 3% of the work force throughout the 1980s. However with high and accelerating inflation at this time, it became evident that such low rates were not sustainable, and in the severe crisis in the early 1990s the unemployment rate increased to more than 8%. In 1996 the government set out a goal of reducing unemployment to 4% in 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 78.3%.) 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. If the employment target is to be met, unemployment must decrease more substantially without stepping up the rate of wage increases.

Labor unions 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 federation of unions, the National Swedish Confederation of Trade Unions or LO (Blue collar), always has been linked to the largest political party, the Social Democrats.

There is no fixed minimum wage by legislation. Instead, wages are set by collective bargaining. Current labor contracts generally run through the year 2003, and call for wage increases of about three percent annually.

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%.

See also: List of Swedish companies, Sveriges Riksbank, Monetary policy of Sweden


Facts

GDP: purchasing power parity - $197 billion (2000 est.)
GDP - real growth rate: 4.3% (2000 est.)
GDP - per capita: purchasing power parity - $22,200 (2000 est.)
GDP - composition by sector: Agriculture: 2.2%, Industry: 27.9%, Services: 69.9% (1999)

Population below poverty line: NA%
Household income or consumption by percentage share:, Lowest 10%: 3.7%, Highest 10%: 20.1% (1992)

Inflation rate (consumer prices): 1.2% (2000 est.)

Labor force: 4.4 million (2000 est.)
Labor force - by occupation: agriculture 2%, industry 24%, services 74% (2000 est.)
Unemployment rate: 6% (2000 est.)

Budget: Revenues: $133 billion, Expenditures: $125.2 billion, including capital expenditures of $NA (2000 est.)

Industries: iron and steel, precision equipment (bearings, radio and telephone parts, armaments[?]), wood pulp and paper products, processed foods[?], motor vehicles
Industrial production growth rate: 7% (2000 est.)

Electricity - production: 146.633 TWh (1999)
Electricity - production by source: Fossil fuel: 5.53%, Hydro: 47.24%, Nuclear: 45.42%, Other: 1.81% (1999)
Electricity - consumption: 128.819 TWh (1999)
Electricity - exports: 15.9 TWh (1999)
Electricity - imports: 8.35 TWh (1999)

Agriculture - products: grains, sugar beets, potatoes; meat, milk

Exports: $85.7 billion (f.o.b., 1999)
Exports - commodities: machinery 35%, motor vehicles, paper products, pulp and wood, iron and steel products, chemicals
Exports - partners: EU 55% (Germany 11%, United Kingdom 10%, Denmark 6%, Finland 5%, France 5%), United States 9%, Norway 8% (1999)

Imports: $80 billion (f.o.b., 2000)
Imports - commodities: machinery, petroleum and petroleum products, chemicals, motor vehicles, iron and steel; foodstuffs[?], clothing
Imports - partners: EU 67% (Germany 18%, United Kingdom 10%, Denmark 7%, France 6%), Norway 8%, United States 6% (1999)

Debt - external: $66.5 billion (1994)
Economic aid - donor: ODA[?], $1.7 billion (1997)
Currency: 1 Krona (SEK)
Exchange rates: Swedish kronor per US dollar - 9.0658 (November 2002), 9.4669 (January 2001), 9.1622 (2000), 8.2624 (1999), 7.9499 (1998), 7.6349 (1997), 6.7060 (1996)
Fiscal year: calendar year

References



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