Growth is set to slow to 2.2% this year and 1% in 2023. Heightened global uncertainty will weigh on business investment and exports. Household consumption is backed by a strong labour market, high savings and fiscal support, but will slow as higher inflation and interest rates start to bite. The unemployment rate will continue to fall this year but will level off in 2023, as skills in high demand become increasingly scarce.
Resolute policy action to protect households and businesses has mitigated the pandemic’s toll on the Swedish economy, which nevertheless contracted sharply in 2020. Growth is picking up on the back of strong manufacturing activity and exports, while vaccination brings hope for a gradual return to normality in sectors requiring face‑to‑face interaction. Nevertheless, fiscal support and accommodative monetary policy will remain necessary until the recovery is well established. Government measures to expand education and training and to enhance job matching, along with the implementation of the labour market reforms agreed by the social partners, will help employment recover, particularly among the most vulnerable groups, which have been worst hit by the pandemic. Fostering inclusive growth throughout Sweden will require upgrading the sub‑national government fiscal framework, enhancing public service efficiency, especially through digitalisation, and promoting regional convergence further, especially by strengthening the role of universities in regional knowledge and innovation networks.
While Sweden is a country with low inequality, the COVID-19 crisis is exacerbating difficulties for some and risks scarring youth working prospects. Inequality in educational outcomes risks widening further, as students from disadvantaged social backgrounds may face greater difficulties to adapt to distance learning. These are top priorities for a more resilient and equitable recovery.
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2021 Structural Reform Priorities