Sweden: Economic and Political Overview
In this page: Economic Outline | Political Outline
Despite Sweden's exposure to global trade dynamics, COVID-19 has had a rather limited impact on its economy compared with most other European countries, with GDP returning to its pre-pandemic level in 2021. After experiencing a mild contraction in 2023 (-0.2% - chiefly on account of stagnating domestic demand), real GDP growth was estimated at 0.6% in 2024, as the fading inflation shock, improved financial conditions, lower interest rates easing debt burdens, and supportive fiscal policy boosted domestic demand growth toward year-end. Consumption is expected to strengthen in 2025 and stay robust in 2026, driven by a lower saving rate, low inflation, and a gradual labour market recovery. Gross fixed capital formation is set to grow solidly from 2025, supported by easier financial conditions and a modest housing construction rebound. Government investment and higher real consumption will boost domestic demand in 2025, while foreign demand is projected to contribute less to growth. Overall, the IMF forecasts growth to pick up further to 1.5% in 2025 and 2.2% the following year.
Sweden is among the few advanced European economies to show both a current account surplus and low public debt. Amid weak growth and rising unemployment, the general government balance fell to an estimated -1.9% of GDP in 2024. With economic recovery, it is projected to improve to -1.4% in 2025 (EU Commission), driven by high defence and Ukraine aid spending and a central bank capital injection. By 2026, the balance is expected to near zero as tax revenues increase. The general government gross debt ratio is forecast to decline to 36.4% of GDP in 2024, 35.4% in 2025, and 34.4% in 2026, thanks to nominal GDP growth. In 2024, HICP inflation fell sharply to an average of 2.1%, down from nearly 6% in 2023, with all subcategories except services slowing significantly. This decline was driven by easing supply bottlenecks, a large negative output gap, lower energy prices, and an effective exchange rate recovery since mid-2023. Inflation is projected to drop further to 2% in 2025 (IMF).
The labour market remained relatively resilient to weak economic growth, partly due to a shift in domestic demand toward labour-intensive services, including health, ICT, restaurants, and hotels. In 2024, unemployment averaged 8.5% (from 7.7% one year earlier). Due to the usual lag between labour market trends and the broader economy, employment growth is expected to pick up in 2025, with the unemployment rate falling below 8% only in 2026 (IMF). Wage growth is projected to stay moderate amid declining inflation. Overall, Swedish citizens enjoy a high per capita GDP of USD 74,143 (PPP, 2024 - IMF), 14.6% higher than the EU’s average. The ratio of people at risk of poverty or social exclusion stood at 18.4% in 2023, compared to an EU average of 21.3% (European Commission).
| Main Indicators | 2024 (E) | 2025 (E) | 2026 (E) | 2027 (E) | 2028 (E) |
|---|---|---|---|---|---|
| GDP (billions USD) | 610.12 | 620.30 | 649.46 | 677.46 | 704.54 |
| GDP (Constant Prices, Annual % Change) | 1.0 | 1.9 | 2.2 | 1.9 | 1.7 |
| GDP per Capita (USD) | 57,625 | 58,100 | 60,358 | 62,503 | 64,559 |
| General Government Balance (in % of GDP) | -0.8 | -1.1 | -0.6 | 0.1 | -0.0 |
| General Government Gross Debt (in % of GDP) | 32.6 | 33.7 | 33.9 | 33.2 | 32.6 |
| Inflation Rate (%) | 2.0 | 2.1 | 2.0 | 2.1 | 2.0 |
| Unemployment Rate (% of the Labour Force) | 8.4 | 8.2 | 8.0 | 7.9 | 7.7 |
| Current Account (billions USD) | 45.34 | 41.94 | 39.10 | 37.73 | 35.89 |
| Current Account (in % of GDP) | 7.4 | 6.8 | 6.0 | 5.6 | 5.1 |
Source: IMF – World Economic Outlook Database, Latest data available.
Note : (E) Estimated data
Agriculture represents 1% of the Swedish GDP and employs around 2% of the workforce (World Bank, latest data available). The main agricultural products are grains (particularly oats, wheat, barley, and rye), potatoes and other root crops, vegetables, and fruits, as well as dairy products, meat and wood. While production exceeds domestic consumption, a significant amount of food needs to be imported due to a lack of crop variety. Sweden has a wealth of natural resources: forests, iron, lead, copper, zinc and hydroelectric energy. The country has 3 million hectares of agricultural area and almost 28 million hectares of forest area (FAO), with a total of 58,218 agricultural holdings (data Swedish Board of Agriculture). In 2024, the index of agricultural labour productivity increased by 22.5% y-o-y (data EU Commission).
The industrial sector contributes 23.3% of GDP and employs 17% of the workforce. It is dominated by groups such as Volvo, Saab, Ericsson, ABB, AstraZeneca, Electrolux, Ikea, H&M, etc. Sweden's main manufacturing activities are steel, automotive, chemical, forestry, industrial machinery and equipment, automation and food processing equipment. The World Bank estimates that the manufacturing sector alone accounts for 14% of GDP. The new technologies and biotechnologies sectors are also of significant importance in the economy. According to figures from Statistics Sweden, total orders in industry decreased by 2.9% year-on-year in 2024, with manufacturing orders losing 2.7%.
The tertiary sector, driven by telecommunications and IT equipment, employs 81% of the active workforce and contributes 65.2% of GDP. The banking sector is comprised of a total of 124 banks, including 42 commercial banks, 36 foreign banks, 44 savings banks and two cooperative banks; moreover, it employs around 44,500 people, accounts for 5% of GDP and contributes to 10% of the corporate taxes revenue (European Banking Federation). The travel and tourism industry is also important to the Swedish economy: in 2023, Sweden received 7.53 million international tourists, marking a 1% increase compared to pre-pandemic levels.
| Breakdown of Economic Activity By Sector | Agriculture | Industry | Services |
|---|---|---|---|
| Employment By Sector (in % of Total Employment) | 1.8 | 17.3 | 80.9 |
| Value Added (in % of GDP) | 1.4 | 21.7 | 66.4 |
| Value Added (Annual % Change) | -3.5 | -1.1 | 1.6 |
Source: World Bank, Latest data available.
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