Sweden’s economy has been relatively stable over the last few decades and has, on the whole, grown steadily since 1970. But there have been challenging times in between.

In the late 1980s and early 1990s, the Swedish economy suffered from low growth and high inflation, and the Swedish krona was repeatedly devalued. During the severe financial crisis in the early 1990s, Swedish banks became unstable and two were nationalised, unemployment rose sharply and government spending soared, as did national debt.

The path back to stability was not easy. But by pursuing reforms – and sticking to them – Sweden transformed its economy, paving the way for robust growth in the face of global economic uncertainty.

A balanced budget

According to the International Monetary Fund, Sweden's national debt to GDP ratio has mostly fallen since 1995. Throughout this period, Sweden's ratio has remained lower than the Euro Zone average. All three leading credit agencies give Sweden the highest credit rating, which is rare, even among developed economies.

Since the crisis of the 1990s, successive Swedish governments have managed to maintain control over public spending, and continued to do so even in the wake of the 2008 global financial crisis.

This was made possible by Sweden reinventing its economic governance with a series of regulations. First, in 1996, a ceiling for public spending (utgiftstak) was introduced. This was accompanied by the addition of the ‘surplus goal’ (överskottsmålet) for the government budget – measures that remain largely intact.

Long-term solutions

These reforms have helped prevent the accumulation of debt and ensure that the national debt is kept in check. The 'debt anchor' (skuldankare), introduced in 2019, is a complement aimed at keeping long-term debt at 35 per cent of GDP.

Additionally, the Swedish Fiscal Policy Council (Finanspolitiska rådet) was established in 2007. This committee of experts audits the government’s policy decisions regarding public finances and aims to ensure that these remain consistent with the goals of growth, employment and long-term financial sustainability.

A dynamic economy

Today, Sweden has a diverse and highly competitive economy. In the the IMD World Competitiveness Ranking 2023 – which ranks 64 economies – Sweden came eighth.

According to the World Bank, a key feature of the Swedish economy is its openness and liberal approach to trade and doing business. Sweden has traditionally been an export-orientated nation, and typically maintains a trade surplus, i.e. the value of goods and services it exports is greater than the value of imports.

From startups to unicorns

In addition to maintaining competitiveness in goods and manufacturing, growth in service sectors such as information and communications technology (ICT) has been strong in Sweden. Sweden has produced many 'unicorns' – companies that become valued at more than USD 1 billion while unlisted – such as video game developers King and Mojang, fintech company Klarna and music streaming service Spotify (some of which have since become listed on stock exchanges).

Last updated on 9 June 2023
Source: sweden.se