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Sweden has contributed to the fame of the Nordic model, where high per capita income and open markets go hand in hand with social cohesion. The current downturn and the fallout from the global financial crisis pose a key challenge to policymakers seeking the most appropriate mix of financial market measures and monetary and fiscal policy responses. Over the longer term, key challenges for the Swedish economy lie in: finding the right path for fiscal policy, given the current large structural surpluses and future fiscal pressures; tackling the most distortive elements of the tax system; improving education and reducing the high rate of youth unemployment; and improving productivity through privatisation. This chapter lays out these key challenges, and reviews policy progress on those challenges identified in previous Surveys, within the framework of a medium-term growth assessment based on potential labour supply and productivity growth.