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, but has recently been showing signs of possibly
heading toward a new recession. Growth has been strong in recent years, with an
annual average GDP growth rate of 2.7% in 2005, 4.1% in 2006, 2.7% in 2007, and
an expected drop in 2008 to 2.4%. The inflation rate was low in 2006, with an
annual average of about 1.5%. The rate increased to 2.2% in 2007. Unemployment
has been a stubborn problem, but is now improving. In 2006 the unemployment rate
reached 7.1%, but in 2007 it fell to 6.2% and in 2008 it is expected to drop to
5.8%. Since the mid-1990s, Sweden's export sector has grown significantly as the
information technology (IT), telecommunications, and services industries 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. Since 2003, however, this has not been
the case, as the services balance swung into surplus in 2003 and has improved
further since then. The income account also shifted from deficit into surplus in
2003, before slipping back to register small deficits in the years through 2007.
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 from 2003 to 2005. 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.
Central government debt rose from 2002-2005 but fell between 2005 and 2007, and
the debt is expected to continue falling in 2008 and 2009. As a percentage of
GDP, public debt was 57% in 2000 and is expected to fall to 27% in 2009. In 2007
the central government had a surplus of $17.2 billion. For 2008 and 2009,
surpluses of $17.4 billion and $17.7 billion are estimated. These figures show
great improvement of the Swedish economy since the crisis of the early 1990s.
The government plans to sell $31 billion in state assets during the next three
years to further stimulate growth and raise revenue to pay down the federal
debt. The new, strict budget process calls for spending ceilings set by
Parliament. In 2007 the ceiling was set at $159.8 billion. These budget reforms,
in combination with a constitutional change to the Swedish Central Bank, an
independent entity, have greatly improved policy credibility. The effects of
this improved credibility can be seen in the long-term interest rate margin
compared against the Euro, which is negligible. From the perspective of
longer-term fiscal sustainability, the anticipated reform of old-age pensions
entered into force in 1999. The pension reform entails a far more robust system
vis-à-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. Both fiscal consolidation and pension reform have put public finances back on sustainable footing.
Almost 80% 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 national minimum wage. Instead, wages
are set by collective bargaining.
U.S. direct investment in Sweden in 2006 (January-September) was approximately
$2.16 billion. Major investments were made in computer software and hardware,
IT/telecommunications, industrial goods, and health care.
GDP (2007, purchasing power parity): $308.9 billion. GDP (2007, official exchange rate): $384.1 billion.
Annual growth rate (2007): 2.7%.
Per capita income (2007, purchasing power parity): $36,500.
Inflation rate (June 2008): 3.2%.
Natural resources: Forests, hydroelectric power, iron ore, copper, lead, zinc, gold, silver, tungsten, uranium, arsenic, feldspar, timber.
Agriculture (2007 1.4% of GDP): Products--dairy products, meat, grains (barley, wheat), sugar beets, potatoes, wood. Arable land--6 million acres.
Industry (2007: 28.9% of GDP): Types--machinery/metal products (iron and steel), electrical equipment, aircraft, paper products, precision equipment (bearings, radio and telephone parts, armaments), wood pulp and paper products, processed foods.
Services (2006: 69.8% of GDP): Types--telecommunications, computer equipment, biotech.
Trade: Exports (2007)--$170.2 billion. Types--machinery, transport equipment, motor vehicles, wood products, paper, pulp, chemicals, iron and steel products and manufactured goods. Major trading partners, exports (2008)--Germany 10.3%, Norway 9.1%, U.K. 7.7%, U.S. 7.0%, EU total 61.6%. Imports (2007)--$150.6 billion. Types--machinery, petroleum and petroleum products, chemicals, motor vehicles, iron and steel, foodstuffs, clothing. Major trading partners, imports (2008)--Germany 18.4%, Denmark 9.5%, Norway 8.8%, U.K. 6.9%, Netherlands 5.8%, Finland 5.5%, France 5.3%, EU total 70.9%.
