Economic surveys and country surveillance

Economic Survey of Sweden 2012

 

OECD Economic Surveys: Sweden 2012 | OECD Free preview | Powered by Keepeek Digital Asset Management Solution

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The Swedish economy has exhibited resilience in the face of international turbulence, thanks to sound macroeconomic policies and substantial structural reforms carried out since the early 1990s. The main challenge going forward is to maintain robust trend growth and make it more inclusive and stable against the backdrop of a weak and uncertain external environment. Maintaining a high level of welfare will help in pushing ahead with reforms.

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‌‌The macroeconomic policy stance is broadly appropriate given recent developments and risks.  However, there is scope to ease monetary policy further, if needed. Longstanding fiscal prudence also gives Sweden room for discretionary stimulus to support the economy if the outlook turns out to be weaker than expected by the authorities.

Sweden’s large banking system entails risks and potential costs. Although matched by substantial assets, high household debt makes households vulnerable to a fall in house prices, an increase in real interest rates or rising unemployment. Disorderly household deleveraging would affect the banking sector. A more effective financial supervisory framework with a well developed macroprudential toolkit would help address these risks.

Addressing the structural problems in the housing market would ensure adequate housing supply, reducing the risks associated with house prices, which have increased substantially in recent years and are high by historical standards. This would require continuing with reforms to raise the supply of rental apartments, to simplify and shorten the building process and to intensify competition in the construction sector.

Making the tax system more conducive to an optimal allocation of wealth would raise potential growth. Low property taxes have contributed to the increase in house prices. Though politically difficult, taxes on owner-occupied housing should be raised to better align the taxation of this type of asset with that of other assets. The taxation of financial assets should be made simpler and more neutral.

There is a need for better labour market integration. Recent labour market performance has been better in Sweden than in many other countries. Nevertheless, some groups such as youth with limited education, some immigrants, and those on sickness and disability benefits are not well integrated. Lower minimum wages relative to the average wage for groups at risk of becoming unemployed, a more efficient vocational and education system, active labour market policies better targeted to individual needs, combined with the existing earned‑income tax credit would help these groups find a job and escape the risk of poverty. To the extent that these groups might be trapped in temporary contracts, it will be important to reduce the gap in job protection between temporary and permanent contracts‌.

While most non-employed receive some type of financial assistance, there is variation in terms of benefits, incentives, efficiency of job-search support and job-search monitoring. The unemployed furthest from the labour market are less likely to receive effective support. The coverage of unemployment insurance could be extended, and contributions to unemployment insurance could be made mandatory. In parallel, the unemployed’s job‑search obligations and the Public Employment Service’s power of sanction will have to be strengthened further. 

How to obtain this publication

 The complete edition of the Economic Survey of Sweden is available from:

 

Additional information

For further information please contact the Sweden Desk at the OECD Economics Department at eco.survey@oecd.org.

The OECD Secretariat's report was prepared by Stéphanie Jamet and Muget Adelet McGowan under the supervision of Vincent Koen. Research assistance was provided by Thomas Chalaux.

www.oecd.org/eco/surveys/sweden2012

 

 

 

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