HyunJeong Hwang
OECD
Jon Pareliussen
OECD
Axel Purwin
OECD
OECD Economic Surveys: Sweden 2025
Abstract
Following a recession in 2023 and weak growth in most of 2024, Sweden faces growing risks from an insecure and swiftly changing international environment. While financial stability risks have eased, Sweden’s high exposure to housing and commercial real estate requires continued vigilance. Household debt remains high, making it risky to relax macroprudential parameters as currently being contemplated by the authorities. The overall fiscal stance in the slightly expansionary 2025 budget is appropriate to support the recovery but it includes measures, such as fuel tax cuts and tax-free savings thresholds, that are not well-targeted. The proposed shift to a balanced budget target provides more flexibility but should be complemented by improved oversight to prevent inefficient spending and secure long-term fiscal buffers to meet spending pressures from ageing and climate change adaptation costs.
Despite significant population growth, largely driven by immigration, Sweden's GDP per capita has outpaced most OECD countries over the past decade. The country's education system, which emphasizes lifelong learning and workforce upskilling, along with a robust social safety net, helps individuals participate effectively in the labour market. Sweden also boasts high living standards and still relatively low income inequality in a cross-country perspective. Social dialogue between employers, trade unions, and the government contributes to social cohesion and adaptability to economic changes. Additionally, Sweden maintains one of the lowest public debt levels in the OECD, supported by a strong fiscal institutional framework, while corruption remains low (see section 1.5). However, in recent years, Sweden's economic performance has fallen behind that of many other OECD countries, and challenges to long-term growth persist. Although a recovery has begun, it remains fragile, and more comprehensive reforms are necessary to enhance resilience and ensure sustainable long-term prosperity.
1.1.1. Sweden’s economic growth has been subdued
After weathering the pandemic well (OECD, 2023[1]) Sweden's economy stagnated in 2022-23 (Figure 1.1, Panel A). Although real GDP growth gradually picked up in the course of 2024 amidst declining inflation and monetary easing, the recovery has remained fragile. Growth over the past three years has fallen short of both historical trends and the OECD average, reflecting weakness in both external and domestic demand (Panel B).
Source: Source: OECD Economic Outlook database; Statistics Sweden and OECD calculations.
Sweden’s economic challenges are closely linked to its high household debt and the housing market. For years, low interest rates and favourable lending conditions led to surging property prices and a rise in already elevated household debt. Changing demand for housing during the pandemic pushed prices even higher. However, as interest rates were raised to combat inflation, Swedish mortgage borrowers, roughly 80% of whom hold variable-rate mortgages, faced soaring interest payments (Figure 1.2, Panel A). While households generally possess substantial assets and strong repayment capacities (Panels B and C), rising mortgage costs coupled with high inflation have eroded disposable income, playing a major role in dampening consumer spending.
1. Occupational pensions and premium pensions.
Note: For the debt servicing cost interest payments have not been adjusted for FISIM or interest cost deduction.
Source: Statistics Sweden and OECD calculations.
Restrictive monetary policy also triggered a sharp decline in housing prices, reducing household wealth and further weakening consumption (Figure 1.3, Panel A). Indeed, in Sweden, a 10% drop in house prices typically leads to a 2% decline in consumption (BIS, 2023[2]). Falling housing prices have also squeezed developers’ profitability as they faced rising financing and construction costs, leading to a sharp slowdown in residential investments and new housing projects. In 2023, housing starts plunged by approximately 50%, the steepest drop since Sweden’s deep financial crisis in the early 1990s. This downward trend continued in 2024, with further drop of around 18%. The construction sector continued to struggle with elevated borrowing costs and a tepid housing market, even as housing prices ticked up. This combination of factors has led to a protracted period of economic stagnation.
Real housing prices¹
1. Real estate price index for one- or two-dwelling buildings. The index has been deflated with the CPI.
Source: Statistics Sweden.
The labour market has also been affected by the broader economic downturn. Employment was resilient during and after the COVID-19 crisis, surpassing pre-crisis levels by the end of 2021, with expansion continuing until the first half of 2023. Since then, employment has declined while unemployment has risen, partly reflecting rising labour force participation (Figure 1.4, Panel A). The construction sector was particularly affected by job losses (Panel B). Labour market weakness continued through early 2025.
1. Difference between male and female unemployment rates.
Note: Panel A and C show seasonally adjusted LFS data for the population aged 15-74. Panel B shows employed by industry, according to the national accounts. Panel C shows seasonally adjusted and smoothed LFS data for the population aged 15-74.
Source: Statistics Sweden; NIER.
The labour market effects of the recent economic downturn have varied by gender. The gender unemployment gap, which widened during the pandemic, narrowed between 2023 and early 2025 (Panel C). This trend partly reflects the sectoral impacts of the downturn, with male-dominated industries such as construction experiencing greater job losses, while female-dominated sectors like healthcare and social work remained relatively more stable. However, women, particularly foreign-born women, continue to face higher long-term unemployment rates than men, underscoring structural barriers in the labour market (Chapter 4).
1.1.2. Inflation has fallen and uncertainty is dampening economic sentiment
After rapid disinflation, inflation fell below the Riksbank’s 2% target in the second half of 2024 (Figure 1.5, Panel A). In December 2024, CPIF (consumer price index with a fixed mortgage rate) inflation, the Riksbank's inflation target variable, stood at 1.5%, marking the seventh consecutive month that inflation was below target. The easing of energy prices has played a key role in bringing down inflation from its peak in late 2022 (Panel B). While inflation expectations have edged up slightly in recent months, they remain close to the 2% target over a five-year horizon (Panel C). In early 2025, inflation rose above the target, with CPIF inflation reaching 2.2% year-on-year in January and 2.9% in February. This rise was partly driven by food prices increasing more than expected mainly due to external factors, as well as a reweighting of the consumption basket, which contributed around 0.3 percentage points.
1. Money market players' expectation, based on telephone interviews with banks, investment companies, pension funds, etc.
2. Trade-weighted average of 15 bilateral real exchange rates (including the euro area as a single entity).
Source: Statistics Sweden; The Riksbank; Ekonomifakta; Bank for International Settlements.
Domestic demand remained weak, and CPIF inflation for March moved back to 2.3%, holding steady at the same level in April. Wage growth is set to remain contained in 2025-26. Swedish industrial workers have reached a two-year wage agreement with employers on a total pay increase of 6.4% over the period, which explicitly sets the standard for economy-wide wage-growth in Sweden’s collective bargaining system. The Swedish krona has appreciated against the euro and other major currencies (Panel D), exerting some downward pressure on inflation.
Recent indicators suggest a weakening outlook in early 2025. Business confidence and firms' hiring plans are both on the decline, reflecting increasing uncertainty surrounding global trade (Figure 1.6, Panels A and B). Household sentiment has worsened even more sharply, with households now more concerned about unemployment than they were a year ago (Panels A and B). This shift reflects not only growing uncertainty, but also higher-than-expected inflation at the start of the year and fading expectations of further policy rate cuts. In addition, financial constraints remain tight, leading many households to continue to prioritise saving over spending (Konjunkturinstitutet, 2025[2]). While the saving rate has decreased, it remains high by historical standards (Statistics Sweden, 2025[3]).
Note: In Panel A the series are standardized to have mean 100 and standard deviation 10. In Panel B the balance is calculated as the difference between the share of positive and negative replies to the survey question. It is thus between 100 (if all replies are positive) and -100 (if all replies are negative).
Source: National Institute of Economic Research.
1.1.3. The recovery is expected to continue, but uncertainty remains elevated
The economy is projected to grow 1.6% in 2025 and 2.3% in 2026 (Table 1.1). In the short term, heightened uncertainty will dampen domestic demand, though investment is expected to gradually recover as confidence improves. Private consumption will strengthen, supported by rising real incomes and improving employment conditions. Inflation is projected to stabilise around target from the second half of 2025, with continued economic slack helping to contain price pressures. Unemployment is set to decline steadily as labour demand increases.
Annual percentage changes unless specified¹, volume (2009/10 prices)
1. Contribution to changes in real GDP. 2. As a percentage of potential GDP. 3. As a percentage of the labour force. 4. CPI with a fixed mortgage interest rate. 5. As a percentage of GDP. 6. National accounts basis, excluding unfunded liabilities of government-employee pension funds.
Source: OECD Economic Outlook No. 117.
Uncertainty remains high, with risks skewed to the downside. On the upside, a more substantial than expected decline in the household saving rate could provide an additional boost to private consumption. On the downside, a prolonged slowdown in key trading partners and spiralling trade protectionism could weigh more on growth than forecast. Direct effects may be relatively modest due to a well-diversified export base (Figure 1.7), but weaker global growth would be harmful to the very open Swedish economy. A more persistent than expected increase in precautionary saving could slow the recovery of household consumption.
In 2024, exports accounted for 55% of Sweden’s GDP, of which goods exports stood at 38% of GDP and services 17%. None of Sweden’s export markets accounted for more than 11% of total goods exports. Despite global economic headwinds, Sweden has maintained a steady 1% share of the world export market in recent years, aided by this diversification (Business Sweden, 2024[4]) as well as a weak currency. Swedish exports have increased their share in 9 out of 14 key product groups, including automotive, chemicals and pharmaceuticals, machinery and electronics, and paper products.
Share of total exports, 2024
Source: Statistics Sweden.
While geographical and product diversification serves as a buffer against the potential adverse effects of increased trade barriers, Sweden’s openness exposes it to global trade disruptions. Notably, its direct exposure to US tariffs is relatively high - exports to the United States represent around 4% of GDP, more than in many other OECD countries (Figure 1.8). Certain industries would be particularly at risk, such as Swedish automotive and steel suppliers, most of which lack local manufacturing or assembly facilities in the United States. This limits their ability to lower effective tariffs by shifting production geographically in the short run.
Direct exports to the United States in 2023
Note: Trade shares based on the OECD’s Balanced International Merchandise Trade dataset for 2023. Proportions of trade are scaled to proportions of nominal goods exports to nominal GDP, based on national accounts data.
Source: OECD Economic Outlook Database; OECD Balanced International Merchandise Trade (2023); and OECD calculations.
Beyond these forward linkages, Sweden's reliance on imported components and raw materials creates additional vulnerabilities through backward linkages. The country is particularly susceptible to supply-side shocks in some raw materials including basic metals (Schwellnus et al., 2023). The raw material supply chain is essential for the green transition, and like many economies, Sweden depends on a few key countries for rare earth imports critical to electrification and battery production (OECD, 2023). The overall impact on the Swedish economy will depend on various factors, including trade policy dynamics, global supply chain adjustments, and potential geopolitical developments. Any major shifts in these factors, notably a further escalation of global protectionism through tit-for-tat trade restrictions, would likely have complex and far-reaching consequences for Sweden and its key trading partners (Table 1.2).
Russia's invasion of Ukraine has underscored energy security risks across Europe, including Sweden. Although Sweden has relatively limited direct exposure to Russia and Ukraine, the war has indirectly driven up electricity prices, particularly in the southern regions, exposing severe imbalances in the country’s energy distribution due to constrained transmission capacity. While price differentials have narrowed in recent months, external factors, such as volatile European gas markets, geopolitical uncertainties, and extreme weather events, could reignite instability. Strengthening grid infrastructure and enhancing storage solutions, as recommended in the previous OECD Economic Survey of Sweden (OECD, 2023), remain critical to mitigating risks and ensuring stable energy prices nationwide.
Financial stability risks in Sweden have eased, but systemic risks remain elevated. Household debt has decreased (Figure 1.9, Panel A), and the debt-to-earnings ratio of commercial real estate developers, which surged during the pandemic, showed a marked decline throughout 2024 (Figure 1.10). Even so, household debt is still high by both international and historical standards. Housing loan growth started increasing again in late 2024 but remains modest for now (Figure 1.9, Panel B). With lower interest rates and housing prices rebounding, there is a risk that households will resume excessive borrowing.
Source: OECD, National Accounts Database; Statistics Sweden.
Similarly, property companies’ debt levels remain elevated, and the sector continues to face challenges, including higher vacancy rates and reduced rental income, placing operations under strain (Figure 1.10, Panel A). The office rental segment remains particularly vulnerable, with vacancy rates continuing to rise and reaching historically high levels in late 2024, largely driven by a sluggish economic recovery and businesses optimizing their office space (Riksbank, 2024[5]).
Source: The Riksbank; OECD, The Swedish Corporate Bond Market (2024).
Moreover, the bond market has become more exposed to property companies, as these firms have increasingly turned to direct borrowing through capital markets (Figure 1.10, Panel B). The real estate sector accounted for roughly 40% of outstanding amounts in the Swedish corporate bond market in 2024 (Carlsquare, 2024[7]). Swedish banks also have considerable exposure to the real estate sector, although the banks remain relatively well-capitalized (Figure 1.11). While banks maintain high risk-weighted capital ratios, their overall leverage exceeds that of many OECD peers. The low average risk-weight density of Swedish banks primarily reflects that their lending is concentrated in sectors with lower risk weights, such as mortgages and commercial real estate, which are typically well collateralised and subject to minimum risk weights of 25%-35% (see below). Even so, a rise in payment defaults and insolvencies among commercial real estate firms could lead to credit losses for banks, potentially undermining financial stability in the context of a banking sector which is highly dependent on market funding (Finansinspektionen, 2024[6]).
2024 or latest
Source: IMF, Financial Soundness Indicators database.
1.2.1. Borrower-based macroprudential policies are effective and should remain in place
Macroprudential instruments can limit the build-up of financial vulnerabilities. Sweden has implemented several such measures over time. In 2015, the countercyclical capital buffer was introduced and gradually raised to 2.5% by 2019. It was reduced to 0% in 2020 during the pandemic, then reinstated to 2% by mid-2023, where it currently remains. Additionally, Finansinspektionen (FI, Sweden’s FSA) introduced a risk weight floor of 25% for Swedish mortgages in 2018. The measure has been extended multiple times since then and will remain in place through 2025. In 2023, FI also introduced a risk weight floor of 35% for commercial real estate exposures and 25% for such exposures secured by residential rental properties.
Beyond lender-based measures, borrower-based tools have also been deployed to address high household debt. In 2010, a mortgage cap was introduced, limiting home loans to 85% of a property's value. Furthermore, FI introduced amortisation requirements in 2016, which stipulate that new mortgages with a loan-to-value (LTV) ratio above 50% must be amortised. Mortgages with an LTV ratio exceeding 70% are subject to a minimum amortisation of 2% of the total loan amount annually, while those with an LTV between 50 and 70% must be amortised by at least 1% per year. Stricter amortisation requirements came into effect in March 2018. These rules mandate that borrowers with housing debt exceeding 4.5 times their gross income must amortise at least an additional 1%, on top of the standard amortisation obligations.
These policies have played a critical role in lowering financial stability risks in Sweden. Evidence indicates that the introduction of stricter amortisation requirements in March 2018 influenced household borrowing behaviour (Thedéen, 2025[7]). The proportion of borrowers with both high LTV (over 70%) and high loan-to-income ratios (over 450%) decreased in 2018, although the temporary exemption of the requirement during the pandemic, combined with monetary policy easing, led to a reversal of this trend in 2020 and 2021 (Figure 1.12, Panel A; and IMF, 2023). Additionally, a growing share of new mortgage holders appear to be borrowing up to exactly 450% of their gross income to avoid triggering the stricter amortisation requirements (Panel B).
Source: Finansinspektionen; The Riksbank.
A government-appointed committee recently proposed relaxing the amortisation requirement and the LTV ratio (Box 1.1). The committee highlighted that while the regulations are designed to enhance financial stability, they also reduce households' cash-flow margins and create barriers for first-time home buyers. The government is expected to present its formal response to the proposal before the summer.
In November 2024, a government-appointed committee (public inquiry) reviewed the amortisation requirements. It found them effective in curbing new mortgage loans. However, the committee emphasized that these requirements restrict households’ ability to smooth consumption over their life cycle and create additional barriers for first-time home buyers. In response to these findings, the committee proposed the following:
Easing amortisation requirements: introducing a uniform amortisation rate of 1% annually for mortgages exceeding 50% of a property's value, replacing the current tiered system.
Raising the loan-to-value cap: increasing the LTV limit from 85% to 90%, allowing borrowers to access larger loans relative to property prices.
Introducing a loan-to-income cap: limiting mortgage loans to 5.5 times a borrower’s annual gross income to ensure responsible borrowing, but with banks allowed to exempt up to 10% of new loans from this cap on account of "unique borrower circumstances".
Source: SOU (2024b); Swedish House of Finance (2024[8]).
The government should carefully weigh the potential consequences of relaxing borrower-based macroprudential policies. While such policies may provide temporary relief to households facing borrowing constraints, notably younger households, they risk driving up housing prices further. This could ultimately undermine the very goal of making housing more affordable. Moreover, easing borrower-based measures during a period of declining interest rates would be poorly timed, since lower rates already expand borrowing capacity and amplify demand pressures in a market where supply only responds to demand with a considerable lag (Chapter 3). FI’s analysis emphasises that high housing prices, rather than borrower-based measures, are the primary barrier for first-time buyers and young households (Ingefeldt and Thell, 2019[9]). Increasing debt-financed purchasing power in a supply-constrained market is not a sustainable solution (Thedéen, 2025[7]).
Additionally, the committee’s proposed reforms may disproportionately benefit wealthier households with greater borrowing capacity. For example, banks would be permitted to exempt up to 10% of new loans from the loan-to-income cap to accommodate "unique borrower circumstances" according to the proposal. Historically, this provision has tended to benefit wealthier borrowers, rather than younger households with potentially strong future income growth. In the United Kingdom, for instance, it was primarily high-income borrowers with larger loan amounts who were exempted from the rules (Riksbank, 2024[10]). Moreover, such exemptions could encourage banks to loosen lending standards in competition with one another, which could fuel rising property prices and further increase household debt.
If the intention is to support first-time buyers, more targeted measures should be implemented combined with structural reforms to address the root causes of high housing prices and household debt. These reforms could include streamlining land-use planning and zoning regulations, countercyclically investing in upskilling personnel involved in housing supply and construction, phasing out rent controls, and limiting the tax bias in favour of homeownership (Chapter 3).
If the government was to directly intervene in what is currently within FI´s mandate, it could disrupt a well-functioning institutional setup where macroprudential policies are set at an arms-length distance, and lower trust in Sweden’s long-term economic management and financial stability. Sweden’s macroprudential framework delegates authority to FI, which is responsible for proposing borrower-based measures. The government then reviews these proposals and has the final say on their implementation.
Detailed microdata on household balance sheets should be collected to enable more targeted prudential interventions, help identify emerging vulnerabilities and improve systemic risk assessments. Unfortunately, such data has not been available since the discontinuation of the wealth tax in 2007. The absence of comprehensive household liquid asset data makes it difficult for authorities to assess imbalances caused by high household debt and to calibrate macroprudential tools effectively (IMF, 2023[11]). While a 2022 government inquiry proposed creating a comprehensive register of household assets and liabilities, it was shelved due to concerns over privacy. Instead, Statistics Sweden has recently been tasked with submitting proposals on how an existing microsimulation model can be expanded with annual data on households' housing loans and consumer loans from various lenders as well as certain assets. While valuable, it primarily focuses on liabilities and may not provide a full picture of household net wealth, particularly due to limited information on liquid and financial assets. The model also relies on imputed data and assumptions, which may reduce precision, especially for vulnerable households. Given these shortcomings, the 2022 proposal to establish a centralised register should be revisited. Sweden already routinely makes detailed registry data available for legitimate purposes within a well-functioning privacy framework. Like in these other cases, privacy concerns could be mitigated through anonymisation techniques and clear governance frameworks to ensure the data is used solely for research and policy purposes, such as taxation and macroprudential policies.
1.2.2. A more resilient corporate bond market would reduce risks linked to the commercial real estate sector
In 2024, the real estate sector accounted for around 40% of outstanding amounts in the Swedish bond market. Given the significant share of loans and bonds tied to commercial real estate developers, this sector's fragility poses spillover risks to the broader financial system. Efforts to enhance the resilience of the corporate bond market are needed to mitigate these risks.
Weak liquidity in the Swedish corporate bond market reflects limited pricing transparency and a high share of unrated bonds. Unlike larger international markets with a larger average size of issuances, where robust systems for pricing and trading bonds exist, Sweden lacks consistent mechanisms for price discovery. While MiFID II already sets transparency requirements for bond markets, and additional self-regulation was introduced by the Swedish Securities Markets Association in 2021, along with the Stamdata platform, challenges remain in ensuring consistent and timely price discovery. Most bonds are traded over the counter with limited public reporting of transaction prices and volumes, leading to unreliable market valuations (OECD, 2024[12]). The high and increasing proportion of unrated bonds further narrows the pool of potential investors, as institutional investors often require credit ratings to meet regulatory and internal risk management criteria (Figure 1.13, Panels A and B).
Note: In Panel C, data for the euro area refer to Q4-2022.
Source: OECD (2024).
Another issue is the homogeneity of the investor base in Sweden’s corporate bond market. Unlike international markets, which are dominated by long-term institutional investors such as pension and insurance funds, the Swedish market relies heavily on small private investment funds (Figure 1.13, Panel C). These funds often offer daily redemptions, requiring them to maintain liquidity to meet withdrawal demands. This dynamic increases the likelihood of fire sales during periods of stress, amplifying price volatility and further eroding market confidence. The relatively small average size of bond issuances also limits participation by larger institutional investors. Additionally, Sweden lacks standardised benchmarks for bonds that could facilitate broader participation.
To strengthen Sweden’s corporate bond market, several measures are needed to tackle the dual challenges of low liquidity and a homogeneous investor base. By expanding credit ratings, improving market transparency, and diversifying the investor base, Sweden can enhance the resilience and attractiveness of its bond market, as highlighted in previous OECD reports (OECD, 2023[1]; OECD, 2024[12]).
As a way to address the high proportion of unrated bonds, policymakers could incentivize issuers to seek credit ratings for their bonds. Promoting domestic rating agencies that offer cost-effective and reliable credit assessments, benefitting from localised operations, lower overhead costs, and a deeper understanding of the regional market, can support smaller companies while meeting international standards (OECD, 2023). This would not only broaden the investor base but also improve market stability by reducing information asymmetries. Some countries, recognising the disincentives for smaller issuers to obtain credit ratings, have introduced systems where credit ratings are provided nationally at a lower cost (OECD, 2024). In France, for instance, the Banque de France has long run the FIBEN system (Fichier bancaire des entreprises), which provides a credit rating for a relatively low fee.
Attracting long-term institutional investors, such as pension funds and insurance companies, would diversity the investor base. Further developing benchmark bonds with minimum issuance sizes and involving multiple intermediaries could attract more global investors. A benchmark bond initiative was developed in 2022 as a voluntary agreement among market participants. While this was an important step in the right direction, continued backing from authorities and major issuers is needed to expand its use. By diversifying the investor base, Sweden would reduce the risk of market volatility and offer a more stable investment environment.
In response to slowing economic growth and stabilising core inflation, the central bank gradually lowered its policy rate from a peak of 4.0%, starting in May 2024 and down to 2.25% by January 2025 (Figure 1.14, Panel A). Inflation declined to levels deemed compatible with the Riksbank's 2% target in 2024 (Panel B). Lower interest rates have had a positive effect on households' and companies' finances, although the full impact on interest expenses and demand is still developing. The housing market has also seen a modest rebound, with increased transaction volumes and rising prices. Inflation rose in early 2025 to well-above target (see section 1.1.2) but as noted this partly reflects a technical re-weighting of the index, and domestic demand remains weak.
1. Consumer price index with a fixed interest rate.
2. Money market players' expectation.
Source: The Riksbank; Statistics Sweden; and Ekonomifakta.
Global energy markets, geopolitical tensions, and domestic demand pose risks to both inflation stability and the economic recovery. For instance, an unexpected surge in global commodity prices or supply chain disruptions could lead to inflationary pressures. New trade barriers could lead to higher prices for imported goods, fuelling inflation in Sweden, which would complicate monetary policy. Meanwhile, weaker than expected demand could also keep inflation subdued, and US tariffs on China could lead some Chinese exports to be rerouted to Europe, lowering price pressures as a result. The Riksbank should therefore maintain the policy rate at the current level for now, which likely is broadly neutral. It should remain prepared to lower the rate further if domestic demand weakens and inflation falls below target, or tighten if upside inflation risks materialise.
The Riksbank has projected higher rates than those expected by markets (Figure 1.15, Panels A and B). The significant discrepancies between the Riksbank’s anticipated interest rate path and market expectations have raised questions about central bank credibility and the effectiveness of the future interest rate path as a tool for forward guidance (Hassler and Vestman, 2024[13]). The Riksbank's interest rate paths suggested a substantially more restrictive monetary policy for 2024 and 2025, both in nominal and real terms, which appeared inconsistent with its own economic forecasts showing inflation reaching the target in 2024 and a persistent negative GDP gap. The same issue arose during the 2007-08 global financial crisis. The Riksbank provided explanations for its policy rate paths, citing factors such as the underestimation of inflationary pressures in 2022, which was a common challenge for many central banks, and the high uncertainty in 2023 regarding firms’ pricing behaviour and the broader inflation outlook (Riksbank, 2024[14]). However, the justification for maintaining such a restrictive stance in the face of these projections may not have been fully persuasive, contributing to confusion about the Riksbank's policy intentions and decision-making process (Hassler and Vestman, 2024[13]).
To enhance transparency and credibility, the Riksbank should ensure that its projected interest rate path is more closely aligned with its economic projections and policy objectives. Furthermore, when the interest rate path diverges significantly from market expectations or seems inconsistent with economic forecasts, the Riksbank should provide more detailed explanations for the rationale behind them.
Note: Market expectations are shown as quarterly averages.
Source: The Riksbank.
The Riksbank's financial position has been weakened in recent years due to several factors, including valuation losses on bond holdings and structurally low seigniorage revenues (OECD, 2023). In 2024, the Riksbank was recapitalised with SEK 25 billion (0.4% of annual GDP). These challenges have raised concerns about the bank's ability to effectively conduct monetary policy and maintain its independence. In response, the Riksbank Act was amended in 2024 to allow the Riksbank to require credit institutions to hold interest-free deposits if its equity falls below a specified target level. This measure aims to improve the Riksbank's net interest income and enhance its financial sustainability. However, the imposition of interest-free deposits may impact the liquidity and profitability of credit institutions. As such, the Riksbank will need to carefully monitor these effects to avoid placing undue pressure on the banking sector. To further strengthen its financial position in the long term, the Riksbank could explore alternative revenue-generating strategies.
1.4.1. The slightly expansionary 2025 budget could be better targeted
After expansionary fiscal policies in the context of the covid pandemic, the government adopted a cautious approach in 2023-24, supporting the Riksbank’s efforts to curb inflation. The 2024 budget was broadly neutral with unfunded measures totalling SEK 40 billion (0.6% of GDP). Key measures included continued tax reductions on fuels introduced in 2022, lower labour taxes for low- to moderate-income earners via an increased earned income tax credit, lower taxes for pensioners, and additional funding for local governments. To partially offset these, the adjustment of the national income tax threshold was paused.
To respond to weak domestic demand, the 2025 budget is slightly expansionary as measured by the change in the cyclically-adjusted government primary balance. Not counting military support to Ukraine, the budget includes new measures totalling close to SEK 61 billion (0.9% of GDP), aimed at restoring household purchasing power, reinstating the work-first principle, and increasing growth. The budget extends some of the previous measures, such as lower taxes on fuels and lower taxes for pensioners. Additionally, it further enhances the earned income tax credit and reduces taxes on investment savings accounts. Additional stimulus of 0.2% of GDP was announced in the April Spring budget bill, including a new home renovation tax break and increased road maintenance spending. Defence spending is set to rise in 2025 to 2.4% of GDP under NATO’s definition. In light of the changing security environment and in anticipation of increased defence spending commitments for NATO members, the government in March 2025 proposed to temporarily finance higher defence spending through increased borrowing. Following this proposal, the government announced plans to increase defence expenditure further to 3.5% of GDP by 2030.
Given a narrowing but large negative output gap, the slightly expansionary fiscal policy stance is appropriate to support the economy's recovery. The budget also strikes the right balance between stimulating growth and maintaining fiscal discipline, with the fiscal deficit projected to narrow slightly to 1.4% of GDP in 2025.
Even though the fiscal stance is appropriate, concrete measures could be better targeted. Fuel tax cuts will do very little to address cost-of-living pressures, which was their stated objective. Their necessity is questionable, particularly given the recent decline in energy costs. According to Statistics Sweden, nearly 95% of the wealthiest households (top 20%) incur transport fuel expenses, compared to just half of the lowest-income households (bottom 20%). As a result, the tax cut is regressive, exacerbating inequality and offering limited relief to lower-income households. Furthermore, the proposal undermines Sweden’s long-standing environmental objectives by lowering taxes on fossil fuels and air travel, which are major sources of carbon emissions.
The policy to lower taxes on investment savings accounts (Swedish Investeringssparkonto, ISK) risks exacerbating economic inequalities. Starting January 1, 2025, the first SEK 150 000 saved in an ISK or endowment insurance is exempt from yield tax, with the tax-free threshold increasing to SEK 300 000 in 2026. This policy, estimated to cost SEK 7 billion (0.1% of GDP) annually (Konjunkturinstitutet, 2024[15]), aims to encourage long-term savings and improve financial resilience, particularly for low- and middle-income households. However, the tax-free threshold is set much higher than the median savings level (SEK 78 000), meaning the policy primarily benefits individuals who are already saving (Jansson, 2024[16]). Furthermore, wealthier households are better positioned to invest large sums, while low-income households often lack the means to participate. While the exact effects on the allocation of savings and the amount of new savings triggered by the policy remain uncertain, the incentives created by the higher tax-free threshold could still lead to increased disparities in wealth accumulation over time. Additionally, the policy may exacerbate tax planning, such as transferring wealth within families or shifting funds from taxable accounts to ISK to avoid taxes on returns (see section 1.6). This could concentrate wealth in the hands of those who are already well-off. Moreover, as Swedish households already have a relatively high saving rate compared to other OECD countries and compared to before the pandemic, further incentivizing household saving should perhaps not be a policy priority.
To reduce income-shifting risks and better align the reforms with their objectives, the government should reconsider the design of the tax-free threshold. The current blanket exemption could be replaced with a means-tested savings allowance, targeting low- and middle-income households more effectively. This would encourage saving among underserved groups while minimizing fiscal costs and reducing tax planning loopholes.
The government has gradually expanded the Earned Income Tax Credit (EITC) since its introduction in 2007, with recent enhancements both in 2024 and 2025. The primary aim of the EITC is to activate people who are out of the labour force or underemployed, by offering them a financial boost that makes work more rewarding. It helps to reduce the participation tax rates on low-income earners, thus making work more attractive relative to social benefits. However, increasing Sweden’s EITC further will come with a sizeable fiscal cost while it will likely have negligible employment effects. Empirical evidence suggests that a narrow earnings distribution, such as in Sweden, makes it much costlier to alter work incentives for a specific target group, which makes policies either expensive or ineffective (Immervoll and Pearson, 2009). Getting a significant proportion of the half a million individuals in Sweden’s unutilized labour force (excluding those unemployed for less than six months) into work via the EITC would be extremely costly for public finances. Moreover, the main barriers to employment among low-income workers in Sweden are not financial incentives, but skill deficiencies and mismatches between jobseekers' skills and employers' requirements (Fiscal Policy Council, 2024[17]). Rather than expanding the EITC, policies that address these skill mismatches would be far more effective in improving labour market outcomes (Chapter 4).
1.4.2. The proposed shift to a balanced budget target should be complemented by some refinements in fiscal oversight
Sweden’s public finances have been remarkably stable, with an average annual budget surplus of approximately 0.5% of GDP from the late 1990s until the onset of the pandemic. This stands in stark contrast to the OECD average, where the median annual deficit during the same period was -3% of GDP. Central to Sweden’s success has been its robust fiscal policy framework, introduced in the aftermath of the 1990s economic crisis. A cornerstone of this framework is the surplus target, assessed over the business cycle. Compliance is evaluated based on structural saving, which adjusts net lending for cyclical fluctuations and one-off effects. The fiscal framework is updated every eight years. In 2019, the surplus target was reduced from 1% of GDP to 0.33% while the framework was strengthened with the introduction of a gross debt anchor, set at 35% of GDP, serving as a medium-term benchmark to monitor public debt levels. While the surplus target provides an operational guide, the debt anchor acts as a safeguard to ensure long-term fiscal sustainability.
Increasing demands for public spending, such as ageing and investments in climate initiatives, have raised questions about the target’s relevance given Sweden’s ample fiscal space and low public debt (Calmfors, 2024[18]). Furthermore, the downward trend of the neutral real interest rate has reduced the effectiveness of monetary policy (Calmfors, Hassler and Seim, 2023[19]). Compounding the issue is the gradual weakening of Sweden’s automatic stabilisers since the early 2000s, which has increasingly shifted the burden onto discretionary fiscal policy to manage business cycle fluctuations and maintain economic stability (Mossfeldt and Shahnazarian, 2024[22]). At the same time, escalating geopolitical tensions in Europe are driving up military defence expenditures among NATO members.
Recognising these challenges, Sweden is considering a shift from the surplus target to a balanced budget target. Six of the eight parliamentary parties have expressed support for this change, which would take effect in the next fiscal framework period beginning in 2027, with a review scheduled every eight years. The aim is to provide greater fiscal flexibility while maintaining long-term sustainability. Compared to the surplus target, the balanced target offers increased fiscal space enabling approximately SEK 20 billion (0.3% of GDP) in additional annual spending. The balanced budget target is projected to keep public debt at manageable levels, with simulations suggesting it would reach around 37% of GDP by 2034 (Fiscal Policy Council, 2024[20]). Even with a modest deficit target of -0.5% of GDP, public debt would be expected to remain well below the 50% threshold considered safe by the Fiscal Policy Council. This shift also aligns with the revised EU fiscal framework that came into effect in April 2024, which increases flexibility while requiring member states to maintain budget deficits below 3% of GDP and public debt under 60%.
There are good arguments for transitioning to a balanced budget target. Countries should in principle save and borrow to smooth taxes and spending over time while investing according to evolving needs. Spending more as large post-war cohorts age and require more publicly financed services and making time-limited investments to achieve the green transition and boost defence capabilities seem reasonable in this light. However, prioritisation of spending within the overall fiscal envelope has to remain the backbone of fiscal policy efforts to meet societal challenges. Increased lending in itself is not sufficient to solve the pressing societal challenges mentioned above, and concerns remain that increasing fiscal space by borrowing could lead to inefficient spending, erode fiscal discipline, and lead to structural deficits over time. A perceived weakening of fiscal discipline could potentially impact borrowing costs and international confidence down the road.
Prudent oversight can help ensure that additional spending is allocated efficiently and contributes to long-term welfare. To this end, several measures could be implemented. Firstly, developing and implementing a standardised methodology for assessing fiscal performance would enhance transparency and fiscal monitoring. Currently, there is no standardised methodology for calculating structural net lending, including assumptions about potential GDP and cyclical effects. The government changed its methodology for assessing structural net lending in 2022, without clear documentation or communication. This lack of clarity not only makes it difficult for the Fiscal Policy Council to evaluate fiscal performance but also complicates international comparisons and weakens confidence in Sweden’s fiscal policy framework (SOU, 2024[41]; Fiscal Policy Council, 2024). A clear articulation of assumptions related to potential GDP, the GDP gap, and one-off measures, aligning with international standards and ensuring consistency over time would help improve the situation. Furthermore, any changes to the methodology should be accompanied by detailed documentation and communicated to stakeholders proactively.
Secondly, measures are needed to ensure countercyclical responses are both timely and effective in order to prevent fiscal slippage. One potential approach is to task the Fiscal Policy Council with conducting real-time assessments of compliance with the fiscal rule. A proposal to codify the long-standing convention that a structural net lending deviation of 0.5% of potential GDP constitutes a significant departure from the fiscal target could also clarify the threshold for compliance. If this threshold is exceeded, the government is obliged to explain the rationale for deviations to the Riksdag (Parliament). Any new assignments to the Fiscal Policy Council should be accompanied by an evaluation of the need to increase its resources, as its staff and funding remain limited (OECD, 2023[1]).
The government plans to initially finance the increase in defence spending largely through borrowing, resulting in a temporary deviation from the general government net lending target. The defence budget is to be increased from 2.4% of GDP in 2024 to 3.5% of GDP by 2030, an annual increase of approximately 0.2% of GDP. These increases can be financed without deviating from the target for general government net lending (Fiscal Policy Council, 2025[45]). Sweden systematically under-adjusts the expenditure side, thereby creating automatic fiscal space which provides a more than sufficient cushion to absorb these additional defence costs within the balanced budget target (Box 1.2). The rise in defence spending is not a one-off response to a temporary crisis, but represents a permanent upward shift in baseline expenditure. The fiscal framework is designed to ensure that such increases are not financed through borrowing. Failing to adhere to this principle would shift the fiscal burden onto future governments and generations, undermining the core value of intergenerational equity that underpins Sweden’s fiscal framework. The government should therefore reconsider its plan to borrow for defence financing even temporarily.
Sweden’s so-called automatic fiscal space comes about as revenue tends to grow with the economy, while spending generally falls as a share of GDP. This automatic fiscal space is calculated as structurally adjusted savings under unchanged rules within the fiscal surplus target.
The majority of taxes are directly linked to their tax base. Large tax bases such as consumption and labour income move largely in line with GDP over time, and so total tax revenue will grow in line with GDP with unchanged rules. Only some minor taxes are set in nominal terms, such as duties on alcohol and tobacco.
Spending is not directly linked to economic growth in the same way. Sweden’s central government expenditure is divided into three main categories:
Nominally determined expenditure is dominated by general grants to the local government sector. With unchanged rules, this expenditure will stay nominally unchanged from one year to the next.
Rules-based expenditure consists primarily of transfer payments to households. Some benefits are uprated by inflation, some (notably working-age benefits) are not systematically uprated at all, while some pensions for example are uprated in line with a wage index. Transfers therefore move partly with changes in volume (number of recipients) but also with changes in prices according to their uprating rules. Even with unchanged volumes, this expenditure will therefore increase somewhat each year, but it will decrease as a share of GDP over time because nominal GDP generally rises more quickly than prices.
Institutional expenditure rises each year on the basis of an annual “PLO adjustment”, which reflects movements in prices and wages but also includes a deduction for productivity growth. This expenditure, which is mostly related to central government institutions, therefore normally rises more slowly than nominal GDP.
An unchanged expenditure to GDP ratio thus normally implies there is room for active policy measures. In 2019, the fiscal space created in this way was estimated at approximately 0.4% of GDP per year.
Source Konjunkturinstitutet (2019[21]).
1.4.3. Preparing for long-term spending pressures
Although debt is projected to stay low in the medium term even under the proposed balanced budget target, long-term challenges such as an ageing population, climate change adaptation and mitigation and increased defence spending are expected to place significant strain on public finances in the medium to long term. The rising costs of defence are of immediate concern, in light of the changing security environment and commitments within NATO. Population ageing is also projected to exert significant spending pressures, though less severely than in many other OECD countries partly thanks to some automatic adjustment mechanisms of its pension system (Figure 1.16, Panel A).
Given that these costs are largely permanent in nature, relying on debt financing alone would be unsustainable. Relying on the automatic fiscal space alone is also not a viable long-term solution, as it will undermine the adequacy of social protection and further deepen funding gaps in local governments (Box 1.2). Municipalities are legally required to provide services like health care and social care, which will come under increasing pressure due to ageing. Increased productivity in services provision cannot be counted on to bridge the funding gap. Extra funding will be needed either through adjusting central government grants in line with expenditure pressures over time, or by extending municipalities’ taxing powers, for example on property as discussed in chapters 2 and 3.
Note: The baseline scenario disregards current and future fiscal rules. It assumes no policy changes, with age-related costs estimated using the OECD long-term model baseline absorbed through increased borrowing. The structural reforms scenario incorporates key policy recommendations on pensions, taxes, and the labour market, as outlined in the Survey. These include increasing the relative importance of earnings-related pensions, phasing out mortgage interest deductibility, closing the gap in property tax revenues against the OECD average by one-third by 2030, closing the gap in the labour tax wedge against the OECD average by half by 2030, easing rental regulations, and strengthening active labour market policies. The fiscal rule scenario also assumes the adoption of the proposed balanced budget target. The model parameters rely on simplified assumptions standardised across OECD countries.
Source: OECD calculations based on the OECD Long-term model; Guillemette and Château (2023).
Increasing tax revenues and reducing spending in a cost-efficient and growth-friendly way will be essential to maintaining fiscal stability. The need for tax increases and spending cuts can be reduced by implementing structural reforms including addressing skills mismatches, lowering taxes on work while raising property and environmental taxes in line with this Survey’s recommendations (Figure 1.16, Panel B; Box 1.3).
This box provides a summary of the long-term potential impacts of selected recommendations in this Survey on GDP and public finances (Table 1.6). However, estimating the exact impact of the recommended reforms is challenging due to the lack of suitable theoretical or empirical models. Therefore, the quantification presented in this section is based on scenarios that capture only some aspects of these reforms. It is important to note that the quantified impacts are merely illustrative and subject to large uncertainties.
Note: 1. Increasing the relative importance of earnings-related pensions is assumed to postpone retirement by four months on average by 2050, as it encourages people to work longer. 2. The gap to the OECD average of the labour tax wedge for above-average earners is assumed to be reduced by half by 2030. The capital dividend tax rate in Sweden is assumed to be increased corresponding to one-third of the gap to the OECD average by 2030. One-third of the gap to the average OECD property tax revenues is assumed to be closed by 2030. Mortgage interest deductibility is assumed to be gradually phased out by 2030. The tax reform is assumed to be calibrated so that increased taxes from property, dividends, and fuel offset expenditures for reduced revenue from the personal income tax. 3. The strictness of rent control is assumed to move to the level of Norway, where the initial rent level can be freely negotiated and rent increases are regulated. The reform would increase rental housing supply by a more efficient use of the current housing stock and by incentivising additional investments in rental housing. The OECD Product Market Regulation indicator on barriers to investment (ranging from 1 to 6) is assumed to be reduced by 0.4.
Source: OECD simulations based on the framework by Egert and Gal (2017); Cournède, Fournier and Hoeller (2018[22]); Guillemette and Turner (2020).
Maintaining high employment is a prerequisite to counter the ageing-related contraction of the labour force and its negative fiscal impacts as well as to sustain the Swedish welfare state. Sweden boasts the third-highest labour force participation rate and the tenth-highest employment rate in the OECD. Most unemployed and inactive people of working age face decent work incentives, but long-term unemployment has remained persistently high over the past decade, reflecting skill deficiencies notably among people with low education and immigrants from outside of Europe and North America. Older workers are more skilled and have stronger labour market outcomes than ten years ago (Chapter 4), but recent pension reforms have weakened incentives to continue working into old age, counteracting various initiatives aimed at extending working lives such as the gradual increase in the minimum age for receiving state old-age pension benefits from 62 in 2020 to 64 in 2026.
Despite some reductions, the labour tax wedge remains among the highest in the OECD (Figure 1.17). This is particularly so for above-average income earners. The state income tax, levied at a flat rate of 20% on incomes above the average wage, combined with municipal income taxation averaging 32%, result in a combined top marginal tax rate of approximately 52%. This is well above the OECD average of 35%. In contrast, capital income, such as dividends and capital gains, is generally taxed at a flat rate of 30% and can be reduced to around 20% in specific cases, such as for closely held corporations and housing sales, and even to around 10% for the special Investment Savings Accounts (ISK) introduced in 2012.
Average labour tax wedge1
1. For a single person household earning the average wage.
2. For a single person household earning 167% of the average wage.
Source: OECD Tax Database.
The substantial gap in tax rates between labour and capital income is likely to incentivize income shifting, where some individuals reclassify labour income as capital income to benefit from the lower tax rate. Indeed, empirical studies suggest that income shifting is widespread in Sweden, especially among owners of closely held corporations (Alstadsæter and Jacob, 2016[26]; Selin, 2024[29]). This behaviour not only exacerbates inequality, as the benefits of income shifting are typically concentrated among high-income individuals, but also leads to significant losses in potential tax revenues. Indeed, income inequality has risen over the past decades in Sweden (Figure 1.18, Panel A), largely driven by capital gains (Panel B).
1. Based on equivalised disposable household income deflated by CPI. 1995-2019 for Denmark.
2. Gini coefficients over the equivalised household distribution.
Source: OECD, Income Distribution Database; Statistics Sweden.
Reducing the labour tax wedge would improve work incentives. As of January 2025, the government lowered the top marginal tax rate from 55% to 52% by abolishing the tapering of the earned income tax credit for high-income earners. Further reductions in the rate could be considered. The state income tax generates around SEK 64 billion, or approximately 2% of total public sector funding (Waldenström, 2024[23]). Research consistently shows that lower marginal tax rates increase pre-tax income, particularly among high-income earners (Waldenström, 2024[23]; Kleven et al., 2023[24]), although there is disagreement on whether this is due to enhanced work incentives and economic activity, to stronger incentives for high income earners to bargain more aggressively to increase their share, or to reclassification of income (Hope and Limberg, 2022[25]).
At the same time, Sweden should align the taxation of capital income more closely with labour income rates to enhance tax equity and revenues. One possible approach is the introduction of a dual progressive income tax system, in which labour income is taxed at progressive rates and capital income is also taxed separately under a progressive rate structure. Historically, Sweden’s dual income tax system, with its lower tax rates for capital income, was designed to reduce capital flight and foster business dynamism. However, advancements in international tax cooperation, such as the Automatic Exchange of Financial Account Information between tax administrations, have significantly reduced the risks of capital flight and tax evasion (OECD, 2023[1]). Furthermore, Norway’s experience demonstrates that aligning labour and capital income taxation can effectively reduce inequality (Thoresen et al., 2011[26]).
Sweden should also consider gradually phasing out the tax deductibility of interest expenses to broaden the tax base and incentivize businesses to adopt more balanced financing structures. Under current corporate tax rules, interest expenses on loans are tax-deductible, whereas the cost of equity capital is not, creating an unintended bias favouring debt-financing (Regeringskansliet, 2024[27]). This preferential treatment not only reduces the tax base but can also encourage excessive leverage, which can increase financial vulnerabilities for businesses and the broader economy.
Sweden’s property tax revenues are among the lowest in the OECD. This is largely due to the recurrent tax on residential property being capped at a low level (OECD, 2023[1]; and see Chapter 3). Given the relatively rapid increase in house prices over the past decades, this system, combined with generous mortgage interest deductibility, had large revenue implications. The government should consider removing or gradually phasing out the current cap on recurrent property taxes to better align tax liabilities with market values, or scaling back mortgage interest deductibility. One way to potentially overcome political difficulties in taxing owner-occupied housing and diversifying municipal revenues would be to move property taxing powers to municipalities (Chapter 3). The ROT (Repairs, Maintenance, and Home Improvement) tax deduction is a further tax subsidy benefitting homeowners. The government plans to temporarily increase the tax deduction from 30% to 50% between May 2025 and the end of the year, as a measure to support the economic recovery.
Lengthening working lives as life expectancy increases is also important to strengthen public finances and to ensure sufficient pension income. Swedish people generally work longer compared to many other OECD countries, and a series of reforms have been implemented to extend working lives further. The “target retirement age”, introduced in 2019 to nudge retirement decisions, was set at 67, effective from 2026, after which it will increase by two-thirds of the gains in life expectancy. The minimum age for drawing a state pension increased from 62 to 63 in 2023, with plans to further raise it to 64 by 2026. The guaranteed pension age also increased from 65 to 66 in 2023, and it will be linked to life expectancy starting in 2026. In 2024, Parliament approved a proposal allowing pensioners to pause payments from occupational pensions during the first five years of drawing them. This flexibility aims to encourage older individuals to remain in the workforce longer by enabling them to adjust their pension payouts as needed.
However, Sweden recently implemented a pension reform that may weaken work incentives, undermining these efforts. In 2021, Sweden introduced a new tax-funded income pension supplement to the public earnings-related pension. The supplement is for pensioners who after a long working life have earned only limited pension rights. A person will no longer be entitled to the supplement if earnings-related pension rights exceed a threshold. This means that additional work can in some cases reduce the cumulative income pension supplement (OECD, 2023[1]; Fiscal Policy Council, 2022[28]). Retirement does not significantly reduce income for most Swedes, and low-income workers often see an income increase upon retiring. The previous OECD Economic Survey (OECD, 2023[1]) recommended shifting focus toward earnings-related pensions to maintain work incentives and fiscal sustainability but no actions have been taken yet.
Sweden enjoys low levels of corruption according to global indices and its citizens have a relatively high trust in public institutions and fellow citizens (OECD, 2024[29]). Anti-money laundering enforcement is effective and policy settings to control corruption are generally considered best practice among OECD countries (Figure 1.19). Nonetheless, government agencies warn that risks of corruption, infiltration by criminal gangs and welfare fraud are mounting within the public administration, notably at the local level (Gunnarson, 2023[30]). Moreover, a recent OECD report (OECD, 2024[31]) notes that while Sweden has recently improved regulation on foreign bribery and lobbying, policies are not yet best practice. Few foreign bribery investigations lead to prosecution and the prosecutions have resulted in a high number of acquittals for natural persons and not one sanction against a legal person. Moreover, public authorities, including the tax agency and agencies for export credits and development aid, have yet to contribute to detection of foreign bribery, suggesting there is room to strengthen domestic detection mechanisms.
Note: Panel B shows the point estimate and the margin of error. Panel D shows sector-based subcomponents of the “Control of Corruption” indicator by the Varieties of Democracy Project. Panel E summarises the overall assessment on the exchange of information in practice from peer reviews by the Global Forum on Transparency and Exchange of Information for Tax Purposes. Peer reviews assess member jurisdictions' ability to ensure the transparency of their legal entities and arrangements and to co-operate with other tax administrations in accordance with the internationally agreed standard. The figure shows results from the ongoing second round when available, otherwise first round results are displayed. Panel F shows ratings from the FATF peer reviews of each member to assess levels of implementation of the FATF Recommendations. The ratings reflect the extent to which a country's measures are effective against 11 immediate outcomes. "Investigation and prosecution¹" refers to money laundering. "Investigation and prosecution²" refers to terrorist financing.
Source: Panel A: Transparency International; Panels B & C: World Bank, Worldwide Governance Indicators; Panel D: Varieties of Democracy Project, V-Dem Dataset v12; Panels E and F: OECD Secretariat’s own calculation based on the materials from the Global Forum on Transparency and Exchange of Information for Tax Purposes; OECD, Financial Action Task Force (FATF).
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