Sweden is an example of well-structured capitalistic economy, with a strong social benefits and welfare character. This can be attributed to some ‘visionary’ Swedish politicians and the fact that they put their citizens’ benefits at the forefront of their decisions, while establishing at the same time a sustainable economy, through the tight control and mitigation of ‘negatively’ impacting economic indicators, such as national debt, inflation, unemployment, etc.
Since the 1990s, Swedish governments have managed to successively balance the annual budget, through a series of innovative regulations, courageous reforms, and the establishment of the Swedish Fiscal Policy Council –an auditor of the government’s policy decisions regarding public finances. This development was particularly important, considering the tough austerity measures –including high increases in taxes, cuts in public spending- that governments around the world with large budget deficits, were obliged to take, when the global economic crisis hit in 2008. In contrast, Sweden, managing to adapt to the new circumstances, not only avoided these practices, but also continued to invest in social and healthcare areas, while reducing at the same time its taxation.
Characteristically, as seen below, a significant 31% of the national budget for 2017, is intended to be allocated to Financial security for elderly, sick, disabled and families (EA10, EA11, EA12 categories) and a further 12% to Education (EA15, EA16).
Today, according to the Global Competitiveness Index Report for 2015-2016, of the World Economic Forum, building on the lessons learned from the 1990s financial crisis, Sweden ranks as the 5th and 9th most competitive economy, at European and global levels respectively. The main pillars of this success can be found in the “Technological readiness”, “Macroeconomic Environment” and “Health & Primary Education” indicators.
Today, from the very north, to the south end of the country, dynamic economic models apply and citizens enjoy a high standard of living, across the entire Swedish territory. It cannot be omitted to mention that Sweden is the only European country where each and every region has a higher GDP per capita, than the EU average.
Wounded by the economic crisis of 2008-2009, the Swedish GDP growth rate reduced significantly (more than 7%, in a 2-year period). Thankfully, the economic downturn felt by the country was not long-lasting, due to the immediate reaction in terms of fiscal policy, introduced by the Swedish Government. With obvious signs of recovery and an average growth rate of about 1.2% during the 2012-2014 period, the economy exhibited a strong upturn of 3.8%, in 2015.
However, the 2015 GDP year-on-year increase (of 3.8%) translated to just US $495.6 billion. This is attributed to the moderate economic recovery of the main Swedish trade partners –meaning a reduced importing power from their part-, while the country’s economic development continues to be mostly domestically driven.
In 2016, growth is expected to remain more or less at 2015 levels. However, the high macro-economic uncertainty in the EU area, affected also by the ‘negative’ result of the UK referendum and the high number of immigrants fleeing to Europe, are projected to lead to a slower growth rate in 2017.
During the period 1995-2007, the liberalization of world trade, in conjunction with the ICT (Information and Communication Technologies) revolution, the emergence of new markets and the improved infrastructure, have created a favourable environment for Swedish trade. However, the outbreak of the global economic crisis in 2008-2009 weakened significantly the external demand, leading to low commodity prices, an extremely important development considering that Swedish exports contribute about half of the country’s GDP. The latter observation is vividly illustrated in the declining trend of the Swedish trade surplus in recent years (see below chart, years 2008-2015).
In more detail, in 2015, Sweden’s exports of goods totalled almost €121.6 billion, while imports reached nearly €119.9 billion (See chart above), resulting in a trade surplus of about €2 Billion.
When comparing Swedish Trade with that of the rest of the Western European Market, it becomes apparent that during the last decade (2004-2015), Sweden lost about 31% of its overall market share, almost twice as much as the losses of Western European countries. The most significant loss for Sweden, is attributed to telecoms exports (exhibiting a drop of 66%), followed by losses in pharmaceuticals, machinery and automotive sectors. However, the Scandinavian country did much better in the electronics field, when compared to competitive countries. It cannot be overlooked also, that Sweden preserved its market share in terms of clothing & footwear and increased its foods sector share, when the corresponding Western European countries share declined.
Despite the diminished rate of growth and the recorded losses, when compared to a decade earlier, Swedish companies remain competitive, especially in Machinery, Automotive and Pulp & Paper products, having a significant share in the respective global markets. It is indicative that during 2014-2015, the country’s exports grew faster than market’s growth resulted by the worldwide economic recovery.
The most important Swedish companies on the aforementioned sectors are:
|
1 Machinery |
Atlas Copco, SKF, Alfa Laval, Husqvarna, Hexagon, Nibe, Systemair, Gunnebo, Valmet |
|
2 Automotive |
Volvo AB, Volvo Cars, Scania, Autoliv, Thule Group, Haldex |
|
3 Pulp & paper |
SCA, Metsa, Stora, Billerud Korsnas, Holmen, Sodra Skogsagarna |
In terms of services, the country has managed to maintain its position in the global services market and even increase by 5% its share of such services over the last decade. Sweden’s exports include business services, IT services, tourism, transport, utilisation of intellectual property rights (e.g. through royalties), as well as Merchandising (i.e. onwards selling of goods produced elsewhere).
In the last decade, the dynamic services sector has shown significant growth. ICT was integrated into various fields at the national level, including Manufacturing, Finance, Health and Governmental purposes, contributing greatly to this growth.
Considering the Information and Communications Technologies (ICT) sector, Sweden has managed to become one of the biggest ICT market places in the Nordics, while investing significant amounts on research and promotion of innovation. As a result, it cannot be overlooked that Stockholm is the city with the largest billion-dollar startups in Europe, in which many international firms continue to invest. Swedish success stories, include tech companies such as those of Spotify, Skype, Mojang, AXIS, Truecaller, QlikTech, MySQL, Unibet, King.com, Tobii, iZettle and Klarna.
Finally, many international ICT companies, focusing on Nordic and Baltic markets, have offices in the region. Intel, Google, Apple, Huawei, Arm, Microsoft, TechMahindra, Motorola, Oracle, Sun, Sony, Samsung, EA, Facebook, Nokia and Mediatek, all maintain R&D centres in Sweden.
In 2015, by far the main exporting destination for Swedish products was Western Europe, followed by Asia & Oceania and North America.
Swedish economy growth rate, is among the highest in the world; this typically indicates a continuous decline of unemployment –especially the long-term and that of the youth population-, while employment rate is the highest within the EU. Realising that minimisation of unemployment is important for the welfare of the nation, the Swedish government has undertaken many initiatives in recent years towards this direction. It is indicative that since the current government took office in 2014, 120,000 additional jobs have been created. Moreover, the unemployment rate has dropped under 7% for the first time in more than seven years, while today (2016) the employment rate is higher than before the crisis.
Moreover, through the launch of a new adult education plan, 70,000 new positions will be offered. In addition, other governmental initiatives aim towards the minimisation of the obstacles for finding a job; these include the expansion of broadband access to rural areas, the introduction of loans for driving lessons etc.
Finally, in a country of high social equality as Sweden, the government has increased funds allocated towards the improvement of the working environment, as well as employment of a larger number of women.
Sweden’s admittance to the European Union (1995), has greatly improved the investment climate –till then the environment for direct investments in the Swedish economy, was quite restrictive. In the following decade, Swedish governors implemented many reforms towards the improvement of the business environment. Consequently, in the last decade or so, foreign ownership has increased significantly in Sweden, with the US companies being one of the largest investors, even though investments have been ‘mitigated’ by the global economic crisis in more recent years.
Today, Sweden is considered an attractive destination for investments. Taking advantage of its geostrategic position –as a gateway to Northern Europe and the Baltic Sea region- Sweden managed to establish a stable political environment, and develop a favourable taxation system. The highly educated labour force, and investments in advanced technologies, skills and innovations, have all allowed Sweden to become an extremely competitive economy, attracting investments from all around the world.
Finally, according to the World Bank’s “Ease of Doing Business Report 2015”, Sweden was ranked as the 8th ‘friendliest’ country worldwide. This cannot be considered a matter of chance, but a result of the Swedish ‘trade’ culture, oriented to exports, and based on liberal principles for trade.
In order to further reinforce the economy, the Swedish Government has proposed for the 2016 Budget, measures to reduce central government expenditure, to abolish ineffective initiatives and to increase taxation of higher incomes. In addition, in the 2017 Budget, revenue increases and expenditure cuts have been suggested, through restructuring of the compensation system for immigrants and reprioritising labour market policy objectives, as well as introducing reforms in terms of taxes (e.g. increases in certain chemicals and alcohol taxes).
To reinforce the exporting power of Swedish enterprises, while taking into consideration the expected growth of emerging Asian markets and the slow productivity noted by OECD, the Swedish government set-up in recent years a new Export strategy. To support this strategy, in the ‘export oriented’ 2015 revised budget, some SEK 75 million were allocated, while further funds (some SEK 950 million) for the period 2016-2019 have been announced to this end.
Finally, it cannot be omitted to mention that Sweden aims to be one of the world’s first fossil-free welfare nations. The transition to a sustainable society and the associated achievement of environmental objectives, are of outmost importance for the Swedish people.
Source: https://sweden.se/
Indicatively, within the 2017 Budget, “Climate and Environment” accounts for SEK 12.9 billion, which is the highest associated allocation in Sweden’s history. Towards the reduction of emissions and strengthening of climate action, the Government has taken many measures, offering increased support to relevant investments, and cancellation of emission allowances within the EU.