Sweden is the seventh-richest country in the world in terms of GDP (gross domestic product) per capita and a high standard of living is experienced by its citizens. Sweden is an export-oriented mixed economy. Timber, hydropower and iron ore constitute the resource base of an economy with a heavy emphasis on foreign trade. Sweden’s engineering sector accounts for 50% of output and exports, while telecommunications, the automotive industry and the pharmaceutical industries are also of great importance. Sweden is the ninth-largest arms exporter in the world. Agriculture accounts for 2% of GDP and employment. The country ranks among the highest for telephone and Internet access penetration.
Trade unions, employers’ associations and collective agreements cover a large share of the employees in Sweden. The high coverage of collective agreements is achieved despite the absence of state mechanisms extending collective agreements to whole industries or sectors. Both the prominent role of collective bargaining and the way in which the high rate of coverage is achieved reflect the dominance of self-regulation (regulation by the labour market parties themselves) over state regulation in Swedish industrial relations. When the Swedish Ghent system was changed in 2007, resulting in considerably raised fees to unemployment funds, a substantial decline in union density and density of unemployment funds occurred.
In 2010 Sweden’s income Gini coefficient was the third lowest among developed countries, at 0.25—slightly higher than Japan and Denmark—suggesting Sweden had low income inequality. However, Sweden’s wealth Gini coefficient at 0.853 was the second highest in developed countries, and above European and North American averages, suggesting high wealth inequality. Even on a disposable income basis, the geographical distribution of Gini coefficient of income inequality varies within different regions and municipalities of Sweden. Danderyd, outside Stockholm, has Sweden’s highest Gini coefficient of income inequality, at 0.55, while Hofors near Gävle has the lowest at 0.25. In and around Stockholm and Scania, two of the more densely populated regions of Sweden, the income Gini coefficient is between 0.35 and 0.55.
In terms of structure, the Swedish economy is characterised by a large, knowledge-intensive and export-oriented manufacturing sector; an increasing, but comparatively small, business service sector; and by international standards, a large public service sector. Large organisations, both in manufacturing and services, dominate the Swedish economy. High and medium-high technology manufacturing accounts for 9.9% of GDP.
The 20 largest (by turnover) registered Swedish companies in 2007 were Volvo, Ericsson, Vattenfall, Skanska, Sony Ericsson Mobile Communications AB, Svenska Cellulosa Aktiebolaget, Electrolux, Volvo Personvagnar, TeliaSonera, Sandvik, Scania, ICA, Hennes & Mauritz, IKEA, Nordea, Preem, Atlas Copco, Securitas, Nordstjernan och SKF.The vast majority of Sweden’s industry is privately controlled, unlike many other industrialised Western countries, and, in accordance with a historical standard, publicly owned enterprises are of minor importance.
An estimated 4.5 million Swedish residents are employed and around a third of the workforce completed tertiary education. In terms of GDP per-hour-worked, Sweden was the world’s ninth highest in 2006 at US$31, compared to US$22 in Spain and US$35 in the United States. GDP per-hour-worked is growing 2.5% per year for the economy as a whole and the trade-terms-balanced productivity growth is 2%. According to the OECD, deregulation, globalisation, and technology sector growth have been key productivity drivers. Sweden is a world leader in privatised pensions and pension funding problems are relatively small compared to many other Western European countries. A pilot program to test the feasibility of a six-hour workday, without loss of pay, started in 2014, involving the participation of Gothenburg municipal staff. The Swedish government is seeking to reduce its costs through decreased sick leave hours and increased efficiency.]
The typical worker receives 40% of his or her labour costs after the tax wedge. Total tax collected by Sweden as a percentage of its GDP peaked at 52.3% in 1990. The country faced a real estate and banking crisis in 1990–1991, and consequently passed tax reforms in 1991 to implement tax rate cuts and tax base broadening over time. Since 1990, taxes as a percentage of GDP collected by Sweden has been dropping, with total tax rates for the highest income earners dropping the most. In 2010 45.8% of the country’s GDP was collected as taxes, the second highest among OECD countries, and nearly double the percentage in the US or South Korea. Tax income-financed employment represents a third of the Swedish workforce, a substantially higher proportion than in most other countries. Overall, GDP growth has been fast since reforms—especially those in manufacturing—were enacted in the early 1990s.
Sweden is the fourth-most competitive economy in the world, according to the World Economic Forum in its Global Competitiveness Report 2012-2013. Sweden is the top performing country in the 2014 Global Green Economy Index (GGEI). Sweden is ranked fourth in the IMD World Competitiveness Yearbook 2013. According to the book The Flight of the Creative Class by the US economist Professor Richard Florida of the University of Toronto, Sweden is ranked as having the best creativity in Europe for business and is predicted to become a talent magnet for the world’s most purposeful workers. The book compiled an index to measure the kind of creativity it claims is most useful to business—talent, technology and tolerance.
Sweden maintains its own currency, the Swedish krona (SEK), a result of the Swedes having rejected the Euro in a referendum. The Swedish Bank of State—founded in 1668 and thus the oldest central bank in the world—is currently focusing on price stability with an inflation target of 2%. According to the Economic Survey of Sweden 2007 by the OECD, the average inflation in Sweden has been one of the lowest among European countries since the mid-1990s, largely because of deregulation and quick utilisation of globalisation.
The largest trade flows are with Germany, the United States, Norway, the United Kingdom, Denmark and Finland.
Financial deregulation in the 1980s impacted adversely on the property market, leading to a bubble and eventually a crash in the early 1990s. Commercial property prices fell by up to two thirds, resulting in two Swedish banks having to be taken over by the government. In the following two decades the property sector strengthened. By 2014, legislators, economists and the IMF were again warning of a bubble with residential property prices soaring and the level of personal mortgage debt expanding. Household debt-to-income rose above 170% as the IMF was calling on legislators to consider zoning reform and other means of generating a greater supply of housing as demand was outstripping what was available, pushing prices higher. By August 2014, 40% of home borrowers had interest-only loans while those that didn’t were repaying principal at a rate that would take 100 years to fully repay.