OECD Economic Survey of Sweden 2021 - Presentation

2021 OECD ECONOMIC SURVEY OF SWEDEN

http://www.oecd.org/eco/surveys/economic-survey-sweden.htm

@OECDeconomy @OECD

Thematic focus: regional inequality

Key messages • Continue to support, in a targeted manner, people and businesses severely affected by COVID-19 until the pandemic subsides.

• Implement the labour market reforms agreed by the social partners to support employment.

• Lay the foundations for a sustainable recovery throughout the country by promoting digital and green developments.

• Support regional development through strengthening multi-level governance and strategic cooperation between government entities, and reinforcing the role of universities as knowledge hubs.

2

GDP contracted less than in many other OECD countries Real GDP change in 2020 % 4 2 0 -2 -4 -6 -8

-12

IRL TUR LTU KOR NZL LUX NOR AUS ISR POL EST DNK FIN SWE CHE USA LVA NLD JPN SVK OECD HUN DEU CAN SVN CZE CHL BEL ISL AUT COL PRT FRA MEX GRC ITA GBR ESP

-10

Source: OECD Economic Outlook database.

3

Activity recovers slowly in some sectors Percentage loss in sales compared to normal Trough

Latest

Internet trade Trade, daily items Finance & insurance Real estate Manufacturing Construction Trade, total Total business sector Job agencies Services, ex. trade Trade, occasional items Advertising and marketing Restaurants Travel agencies Hotels -90

-80

-70

-60

-50

-40

-30

-20

Latest refers to 10-12 May 2021. Trough refers to the minimum value in bi-monthly surveys since 11-13 May 2020.

The percentage loss in sales has been calculated by taking the midpoint of the response options: reduced by 1–25, 26–50 etc.

Source: National Institute of Economic Research.

-10

0%

4

Unemployment has risen markedly A. Unemployment has risen 12

% of labour force 18

10

16

8

8

14

7

6

6

4

5

2

4

0

3

-2

2

-4

1

-6

0

-8

%

←Unemployment rate, LFS¹ ←Unemployment rate, SPES²

9

Employment growth (y-o-y) →

2015

2016

2017

2018

2019

2020

2021

12 10 8 6 4 2 0

JPN POL CZE NLD HUN MEX KOR DEU NZL GBR NOR ISR CHE SVN AUT BEL IRL DNK AUS USA LUX OECD PRT SVK EST LTU ISL FIN FRA CAN LVA SWE ITA CHL TUR COL ESP GRC

% of labour force 10

B. Unemployment rate 2021Q1 or latest quarter

1. Labour Force Surveys (LFS), population aged 15-74. There is a break in the LFS unemployment and employment time series resulting from the adaptation of the Swedish LFS to the new EU framework regulation from 2021 onwards.

2. Swedish Public Employment Service, population aged 16-64.

Source: OECD Economic Outlook database; Swedish Public Employment Service.

5

Fiscal policy is propping up the economy Government net lending % of GDP 2

Sweden

OECD

Other Nordics

0 -2 -4 -6 -8 -10 -12

2019

2020

Other Nordics is an unweighted average of Denmark, Finland and Mainland Norway.

Source: OECD Economic Outlook database.

2021

2022 6

Public finances are solid Gross government debt, Maastricht definition, 2020 % of GDP 250

200

150

100

Source: OECD Economic Outlook database.

GRC

ITA

PRT

ESP

FRA

BEL

AUT

HUN

SVN

EU27

DEU

FIN

SVK

IRL

POL

NLD

LTU

LVA

DNK

NOR

SWE

CZE

LUX

0

EST

50

7

Monetary policy is highly expansionary A. Policy rates

%

Sweden Norway

3.0 2.5

Euro Area United States

B. The Riksbank’s bond holdings

%

% of GDP

3.0

14

2.5

-0.5

-0.5

2

-1.0

-1.0

2021

4

2020

0.0

2019

0.0

2018

6

2017

0.5

2016

0.5

2015

1.0

2014

1.0

2013

1.5

2012

1.5

2011

2.0

2010

Covered bonds

Municipal bonds

Corporate bonds

12

2.0

Source: OECD Economic Outlook database and Riksbank.

Government bonds

10 8

0

2015

2016

2017

2018

2019

2020 8

House prices have been rising rapidly A. Selected OECD countries Y-o-y % changes

Y-o-y % changes 30 25 20

SWE

DNK

CAN

OECD

30

NOR

10

10

5

5

0

0

-5

-5

-10

-10

-15

-15 2008

2010

2012

2014

2016

Flats

Houses

20 15

2006

Total

25

15

-20

B. Sweden

2018

2020

-20

2006

2008

2010

2012

2014

2016

2018

2020

Panel A displays quarterly data adjusted for inflation using the private consumption deflator, up to 2020Q4, Panel B nominal monthly data, up to April 2021.

Source: OECD, House Price database and Valueguard.

9

Key recommendations on macroeconomic policies • Maintain support measures, such as reinforced short-time work and compensation for lost turnover, until the COVID-19 pandemic subsides.

• Maintain strong fiscal policy support until the recovery is well established and gradually move back towards the budget surplus target over the medium term.

• Maintain accommodative monetary policy until inflation is durably close to target, with activity on course to expand at a robust pace.

• If household debt continues to rise rapidly, tighten macroprudential policy.

10

Reforms to boost employment and sustainable growth

The fall in the employment rate of young women has been most persistent % points 4

Change in employment rate from previous year (% points) 2019 Q4

2020 Q1

2020 Q2

2020 Q3

2020 Q4

2021 Q1

2 0 -2 -4 -6 -8

Men 16-64

Source: Statistics Sweden.

Women 16-64

Men 20-24

Women 20-24 12

Permanent workers’ employment protection is relatively strong Index of protection of permanent workers against individual dismissals, 2019 Index 3.5 3.0 2.5 2.0 1.5 1.0

CZE

ISR

PRT

NLD

TUR

BEL

ITA

LVA

GRC

LUX

SWE

CHL

FRA

ESP

MEX

POL

FIN

KOR

SVK

NOR

OECD

LTU

DEU

SVN

ISL

JPN

NZL

COL

IRL

EST

DNK

HUN

GBR

AUT

AUS

CAN

CHE

0.0

USA

0.5

The index ranges from 0 (no regulation) to 6 (detailed regulation).

Source: OECD Employment Protection Database.

13

Key recommendations on employment policy • Implement the labour market reforms agreed by the social partners.

• Strengthen adaptation of vocational education and training to labour market needs by reinforcing regional coordination structures.

• Mainstream the pilot Equal Establishment programme for foreign-born women.

• Implement the pension reform which raises the maximum age for the right to remain in employment and the minimum ages for receiving state old-age and basic pensions in line with developments in life expectancy.

14

Housing affordability is low, as in many OECD countries Housing price levels relative to yearly income, 2019

Number of years of per capita gross disposable income needed to buy a 100 square metre dwelling.

Source: Houselev and OECD, House price database.

15

Household debt is high Household debt, percentage of yearly income, 2019 or latest %

300 250 200 150 100

0

LVA HUN LTU COL SVN POL CHL CZE EST SVK ITA AUT DEU GRC USA ESP JPN BEL FRA PRT OECD NZL IRL GBR FIN CAN LUX KOR SWE AUS CHE NLD NOR DNK

50

Income refers to net household disposable income.

Source: OECD, National Accounts database.

16

Rent control is very strict 1.0 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2

SWE

COL

DEU

JPN

LUX

CHE

ESP

FRA

NOR

MEX

BEL

AUT

NLD

DNK

OECD

LVA

POL

AUS

PRT

IRL

CZE

CAN

FIN

USA

EST

CHL

ISL

NZL

GBR

ISR

0.0

SVK

0.1

The index ranges from 0 (least restrictive) to 1 (most restrictive).

Source: OECD calculations.

17

Key recommendations on housing policy • Shift taxation further away from labour and towards environmentallyrelated taxes and recurrent taxes on immovable property, including through phasing out mortgage interest deductibility.

• Ease rental regulations to incentivise rental housing supply, while maintaining tenant protection against abuse.

• Enhance co-operation between central and local government in land-use planning and increase incentives for municipalities to facilitate the timely release of development land.

• Simplify land-use planning procedures, balancing economic, environmental and social considerations.

18

Carbon dioxide emissions per capita are declining steadily Tonnes per person 25

Sweden

Global

Europe

United States

20

15

10

5

0

1900

1906

1912

1918

1924

1930

1936

1942

1948

1954

1960

Carbon dioxide emissions refer to emissions from burning fossil fuels to produce energy and cement.

Source: Sveriges Riksbank, based on Our World in Data (OWID).

1966

1972

1978

1984

1990

1996

2002

2008

2018 2014

19

Road transport, industry and agriculture are the largest GHG emitters Million tonnes of CO2-equivalent

20

20

18 Other

Other

16

Pulp & paper

14 Heavy trucks

12

Chemistry

10 Light trucks

Cars

Refinery

8 6

Cement & related

4

Iron and steel

2 0

Transport refers to domestic transport.

Source: Naturvårdsverket.

Transport

Own heating

18 16

Waste

14 12

Product use

10

18 16 14 12 10

8 6 4 2 0

20

Industry

Work machinery

8

Electricity and district heating

4

Agriculture

0

6

2 Other

20

Key recommendations on green growth

• Elaborate a roadmap for cost-efficient and technology-neutral decarbonisation of road transport.

• Phase out reductions in carbon and energy taxes for fuels used in agriculture, forestry and fisheries.

21

Keeping regional inequality in check

GDP growth has varied considerably across regions Contributions to real gross regional domestic product percentage change, 2000-18, TL3 regions 70

Productivity

60

Employment rate

Share of working-age popualtion

Population

50 40 30 20 10 0

Data are adjusted for changes in the perimeter of some regions during the period. This has a minor impact on the results.

Source: Based on Statistics Sweden Regional Accounts.

Kalmar

Gävleborg

Norrbotten

Blekinge

Västernorrland

Gotland

Dalarna

Jämtland

Värmland

Västmanland

Jönköping

Södermanland

Västerbotten

Örebro

Halland

Östergötland

Skåne

Sweden

Uppsala

Kronoberg

Västra Götaland

-20

Stockholm

-10

23

Regional disparity in GDP per capita remains relatively low Ratio of RGDP in the top 20% richest TL3 regions over that in the bottom 20% poorest TL3 regions Ratio

2018

4.0

2008

3.5 3.0 2.5 2.0 1.5 1.0

Source: OECD Regional Statistics database.

SWE

AUT

PRT

ESP

KOR

CHE

SVN

USA

NOR

JPN

DNK

NLD

CZE

LTU

ITA

GRC

BEL

FRA

EST

DEU

SVK

POL

LVA

GBR

HUN

COL

0.0

TUR

0.5

24

Well-being varies across regions Well-being regional gap, TL2 regions Ranking of OECD regions (1 to 440) top 20% middle 60% bottom

Central Norrland

Top region

Central Upper Norrland Norrland

North Middle Sweden Stockholm

Bottom region

Småland with Islands

Upper Norrland

Safety

South Sweden

Stockholm

Jobs

Housing

Community

Source: OECD Regions and Cities at a Glance 2020.

Stockholm

Regions (Riksområden) South Sweden

Stockholm

South Sweden

Education

Upper Småland with Islands Norrland

North Middle North Middle Sweden Sweden

South Sweden

Central Norrland North Middle Sweden

North Middle Sweden

South Sweden

Stockholm

Environment

Health

Income

Life Satisfaction

Access to services

Civic Engagement

25

Dependency ratios are increasing and diverging across regions Ratio of population aged below 15 or over 64 to population aged 15-64 (%), TL3 regions 85

Average

Median

Max

Min

80 75 70 65 60 55 50 45 40

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040

The minimum corresponds to the Stockholm region throughout the period. The maximum corresponds to different regions depending on the year.

Source: Statistics Sweden and authors’ calculations.

26

Equalising transfers are slightly above peer countries’ average Percentage of total government expenditure % 10 9 8 7 6 5 4 3 2 1 0

AUS

JPN

DEU

KOR

SWE

ESP

AVG

NLD

CAN

CHE

LTU

IRL

LVA

EST

ITA

Source: Dougherty and Forman (2021), “Evaluating fiscal equalisation: finding the right balance”, OECD Working Papers on Fiscal Federalism, No. 36, OECD Publishing, Paris.

BEL 27

Sweden is among the world’s leading countries in e-government Top performers in e-government Index 1.00 0.98 0.96 0.94 0.92 0.90 0.88 0.86

JPN

NOR

ISL

SGP

Source: 2020 United Nations E-Government Survey.

NLD

USA

NZL

GBR

SWE

AUS

FIN

EST

KOR

DNK 28

Stockholm accounts for a large share of net job creation Share of TL2 capital regions in net job creation and total employment % 100

Share of net job creation¹

Share of total employment²

90 80 70 60 50 40 30 20

1. Net job creation in capital regions relative to nationwide job creation, 2006-16.

2. Total employment in capital regions relative to nationwide total employment, 2019 or latest.

Source: OECD (2018), Job Creation and Local Economic Development 2018: Preparing for the Future of Work.

USA

MEX

DEU

SVK

TUR

NZL

CZE

ISR

CHE

POL

BEL

AUT

AUS

CAN

GBR

CHL

HUN

NOR

NLD

SWE

ITA

ISL

KOR

IRL

DNK

FIN

0

JPN

10

29

Key recommendations on regional inequality • Limit the use of earmarked grants to strategic areas.

• Avoid excessively narrowly targeted and short-term grants.

• Simplify the fiscal equalisation system and/or increase transparency.

• Introduce monitoring on an ongoing basis to facilitate adjustments.

• Develop further on-line public services delivery.

• Enhance the public infrastructure for data and information sharing.

• Strengthen incentives and support to raise the contribution of universities to regional knowledge and innovation.

• Strengthen multi-level governance, including coordination of sector policies and cooperation between government entities and other stakeholders, to enhance strategic cooperation for regional development.

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FOR MORE INFORMATION

http://www.oecd.org/eco/surveys/economic-survey-sweden.htm OECD Economics OECD

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