Long abstract

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Thanks to strong economic institutions and fundamentals, Sweden is well
prepared to cope with fall-out from the global financial crisis. The cycle
has turned and, clearly, the key near-term challenge is to steer through the
slowdown without jeopardising longer-run macroeconomic stability.
With sound structural reforms, material living standards have risen
strongly in Sweden over the past 10 to 15 years. Market opening has
boosted productivity growth, and recent reforms have curbed labour
market exclusion and benefit dependency. The relative decline of previous
decades is gradually being reversed. This Survey focuses on how to further
promote economic growth while preserving social cohesion and examines
the following policy challenges:
Keeping fiscal policy on a sustainable track and continuing tax reforms
to promote growth. The ample fiscal surplus and relatively low public
debt allow for some policy easing, but the fiscal framework should be
strengthened by linking targets more clearly to long-term considerations.
Sweden used to have the highest tax-to-GDP ratio in the OECD but has
started to move down the list. The challenge now is to continue with
tax cuts, focusing on the worst impediments to growth resulting from
corporate and personal income taxation – with due regard to equity
concerns.
Improving education and employment outcomes for youth. Despite
a high overall employment-to-population ratio, youth unemployment
is widespread. One reason is that with a high wage floor and stringent
employment protection rules, strong skills are required to get a regular job.
The quality of compulsory school can be improved, especially regarding mathematics and science. Upper secondary education could make youth
more “job ready”, notably via more work-place contact. Students should
complete higher education and enter the labour market earlier. Universities
could benefit from more freedom to develop, possibly based on tuition
charging. But in the end, disproportionate youth unemployment can
probably only be overcome if also addressing the core labour market
rigidities.
Taking privatisation further. Starting with a large portfolio of governmentowned
enterprises, it was easy to identify a list of first candidates for
sale. Going forward, privatisation will have to be taken further in those
numerous areas where societal objectives are better served by open but
regulated markets rather than by public ownership.