Remarks by Angel Gurría
29 March 2019 - Stockholm, Sweden
(As prepared for delivery)
Dear Ministers, Ambassadors, Ladies and Gentlemen,
I am delighted to be back in Stockholm to present the OECD’s 2019 Economic Survey of Sweden.
I would like to thank the Minister of Finance, Magdalena Andersson, and the Minister of Education, Anna Ekström, for joining us for the presentation of this Survey. This year’s edition focuses on education, which is essential to economic success, inclusiveness, well-being and social cohesion. All of these are top priorities in the Government’s agenda.
Sweden’s economic, environmental, income and gender equality, and well-being achievements are remarkable. Driven by robust consumption, investment and exports, GDP has expanded steadily, at an average rate of close to 3% over the past five years. Unemployment has also declined to 6.3% in 2018 (from 8% in 2013), and the employment rate was close to 80% in 2018. This is among the three highest employment rates in the OECD, and the highest in the European Union!
In addition, Sweden performs well in all dimensions of well-being: life satisfaction is among the best in the OECD, and the work-life balance is good, with only 1% of employees regularly working very long hours. Sweden is also a frontrunner in the fight against climate change and in greening the economy.
However, like many other OECD countries, Sweden also faces important challenges. Global growth prospects create uncertainty for Sweden and put at risk progress made this far. According to our latest Economic Outlook, global growth is projected to further decrease from 3.6% in 2018 to 3.3% in 2019, and to improve slightly to 3.4% in 2020. And global trade tensions continue to threaten exports and hold back investment. This will have a negative impact for an open Swedish economy, reducing GDP growth to only slightly over 1.5% in 2019 and 2020.
There are also structural challenges, like in the housing sector. While housing prices have stabilised, the housing price-to-income ratio remains about 30% above its long-term average, while household debt continues to rise. A better functioning housing market could strengthen financial stability, facilitate residential mobility and enhance well-being.
Digitalisation is creating challenges. Almost one third of jobs in Sweden could see significant changes in how they are carried out as a result of automation, and another 8% could disappear altogether. This highlights the need to further develop adult education, in cooperation with the social partners. But digitalisation also provides opportunities to streamline administrative procedures to boost productivity.
Most importantly, Sweden’s education system is also facing various challenges. School results have been declining for the past two decades, and today, nearly one Swedish adult in five has low literacy or numeracy skills, or both. Moreover, emerging trends in society, such as immigration and rising income inequality, increase residential segregation and contribute to isolating pupils from different social backgrounds into separate schools.
The Survey puts forward a number of recommendations to tackle these and other key challenges. Let me outline three related to these particular areas.
First, macroeconomic policies should remain responsive to macroeconomic developments
If the global economy keeps performing at our projected scenario, policy stimulus should be further scaled down. Swedish monetary policy has tightened somewhat, but remains expansionary, with a policy rate at -0.25%. The Riksbank should continue to raise interest rates gradually, taking inflation and output developments into account. The government should also continue to strengthen budget buffers while the economy remains solid.
In the case of a downturn, monetary policy margins are limited. But with government debt below 40% of GDP, there is space to provide some fiscal stimulus.
Sweden should also continue to address its structural weaknesses, which could have potential adverse effects on the financial and economic stability of the country, as well as on social mobility and well-being, like those in the housing sector.
While the government has taken important steps to address these issues, such as the 22-point plan to release more land for development, accelerate planning processes and subsidise the construction of affordable housing, broader reforms are still needed. For example, property taxation could be reformed, in particular by phasing out mortgage interest deductibility.
In addition, land-use planning procedures need to be simplified and rental regulations could also be eased to incentivise rental housing supply and a better utilisation of the housing stock, while maintaining tenant protection against abuse.
But let me conclude with the central theme of our Survey: the improvement of the Swedish education system. The school system should be an equalising force. Yet the current model of competition and choice further increases school segregation. Therefore, our Economic Survey recommends the implementation of a coherent package of reforms to raise quality and equity in Sweden’s compulsory school system, across three pillars:
First, rebuilding a regional arm of the central government governance structure would enhance local cooperation, improve skills development, promote continuous quality improvements, and instil accountability at every level of the school system.
Second, competition in the choice of schools should be complemented by reliable and transparent information about school quality and better regulation. School entry and investment decisions should help create more diverse pupil groups, which calls for abolishing queuing time as the entry mechanism of choice to private schools.
Last but not least, teaching needs to become more attractive to address teacher shortages. Teacher quality should improve through better teacher education, strengthening lifelong learning and encouraging more co-operation, feedback and support between colleagues.
Ladies and Gentlemen,
The Swedish economy is dynamic, inclusive and resilient. Nevertheless, it is still dependent on the global economy’s continued expansion and openness. It is therefore essential to keep strengthening the economy’s internal engines of growth, to keep raising productivity and competitiveness, while promoting greater inclusion and social cohesion. Enhancing the Swedish education system will be essential for these purposes. Sweden is doing well, but we know it can do GREAT!
Sweden is an increasingly important global player and the OECD is always ready to support its efforts. The Global Deal founded by Prime Minister Stefan Löfven is a great example of what we can achieve together. Let’s achieve even more. The world needs it. Count on the OECD! Thank you.