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- GDP (PPP):
- $448.2 billion
- 2.1% growth
- 2.4% 5-year compound annual growth
- $45,986 per capita
- Inflation (CPI):
- FDI Inflow:
Sweden’s economic competitiveness has been sustained by solid institutional foundations for an open-market system. The judiciary, independent and free of corruption, provides strong protection of property rights and upholds the rule of law. The economy is open to global trade and investment, and high levels of regulatory transparency and efficiency encourage vibrant entrepreneurial activity.
Economic Freedom Snapshot
- 2016 Economic Freedom Score: 72.0 (down 0.7 point)
- Economic Freedom Status: Mostly Free
- Global Ranking: 26th
- Regional Ranking: 14th in Europe
- Notable Successes: Rule of Law, Open Markets, and Regulatory Efficiency
- Concerns: Control of Government Spending and Labor Freedom
- Overall Score Change Since 2012: +0.3
The Swedish economy continues to be characterized by a high level of public spending on social programs. The country’s relatively stringent employment-protection legislation, which has tended to discourage job mobility and dynamic employment growth, needs to be fundamentally revised.
Sweden joined the European Union in 1995 but rejected adoption of the euro in 2003. The public opposes membership in the eurozone. A general election was held in September 2014. After difficult negotiations, a new center-left coalition government consisting of the Social Democratic Party and the Green Party took office. Banks are well capitalized, and Sweden has weathered the financial crisis relatively well. Sweden’s economy is export-oriented. Principal exports include automobiles, telecommunications products, construction equipment, and other investment goods. Due to a number of security incidents in the region that are connected to Russia, the debate about Sweden’s possible NATO membership has resurfaced, but it remains unlikely that Sweden will join the alliance in the near future.
Corruption is generally low in Sweden, which ranked fourth out of 175 countries in Transparency International’s 2014 Corruption Perceptions Index. Effective anti-corruption measures discourage bribery of public officials and uphold government integrity. The rule of law is well maintained. The judicial system operates independently and impartially, and laws are applied consistently. Property rights and contract enforcement are very secure.
The top personal income tax rate is 57 percent, and the top corporate tax rate is 22 percent. Other taxes include a value-added tax and a capital gains tax. The overall tax burden equals 42.8 percent of total domestic income. Government spending amounts to 53.2 percent of GDP. The budget has been in deficit. Public debt has been kept under control and equals about one-third of total domestic output.
The regulatory environment is highly efficient. The minimum capital requirement for limited-liability companies has been cut in half, making it even easier to establish a company. Labor regulations are among Europe’s most rigid. The central bank’s decision in 2014 to lower its main policy rate to zero reflected concern about the persistence of disinflationary pressure but was accompanied by government rejections of proposed cuts in mortgage subsidies.
EU members have a 1 percent average tariff rate. Trade agreements are currently being negotiated with countries that include the United States and Japan. State-owned enterprises distort the economy. The financial sector, which has regained much of its stability over the past five years, continues to offer a wide range of financing options. Banking regulations are sensible, and lending practices have been prudent.