Sweden - Economy

Economy

Sweden is an export-oriented mixed economy. Timber, hydropower and iron ore constitute the resource base of an economy heavily oriented toward foreign trade. Sweden's engineering sector accounts for 50% of output and exports. Telecommunications, the automotive industry and the pharmaceutical industries are also of great importance. Agriculture accounts for 2% of GDP and employment. The country ranks among the highest in telephone and Internet access penetration. In 2010, Sweden had the third lowest income Gini coefficient amongst 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 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 to 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 in 2007) companies registered in Sweden are 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 and SKF. Sweden's industry is overwhelmingly in private control, unlike many other industrialised Western countries and publicly owned enterprises have always been of minor importance.

Some 4.5 million residents are working, out of which around a third has tertiary education. GDP per hour worked is the world's 9th highest at 31 USD in 2006, compared to 22 USD in Spain and 35 USD in United States. GDP per hour worked is growing 2½ per cent per year for the economy as a whole and the trade-terms-balanced productivity growth is 2%. According to 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.

The typical worker receives 40% of his or her income 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 of 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, it collected 45.8% of the country's GDP as taxes, the second highest among OECD countries and still nearly double of that in the United States or South Korea. The share of employment financed via tax income amounts to a third of Swedish workforce, a substantially higher proportion than in most other countries. Overall, GDP growth has been fast since reforms in the early 1990s, especially in manufacturing.

The World Economic Forum 2009–2010 competitiveness index ranks Sweden the 4th most competitive economy in the world. In the World Economic Forum 2010–2011 Global Competitiveness Report, Sweden climbed two positions, and is now ranked 2nd in the world. Sweden is ranked 6th in the IMD Competitiveness Yearbook 2009, scoring high in private sector efficiency. According to the book, The Flight of the Creative Class, by the U.S. 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 Riksbank—founded in 1668 and thus making it 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.