Swedish economy resilient but needs to focus on productivity and human capital to keep its edge | WPN World People News

The Swedish economy has been among the most resilient in Europe, despite the slow global recovery and high uncertainty, but challenges remain if it is to maintain high growth and well-being and extend prosperity to all, according to the latest OECD Economic Survey of Sweden.

The Survey was presented in Stockholm by OECD Secretary-General Angel Gurría, with Sweden’s Finance Minister Magdalena Andersson, Minister for Enterprise and Innovation Mikael Damberg and Minister for Financial Markets and Consumer Affairs Per Bolund. It points out that while Sweden is among the few countries where output is now above its level before the 2008 global financial and economic crisis, GDP per capita has not grown over the period. Reforms are needed to address emerging challenges regarding Sweden’s export performance, skills gap, educational results, youth unemployment and persistent difficulties integrating new immigrants.

“Sweden has navigated through the crisis with limited damage, thanks to a combination of strong macroeconomic, fiscal and financial fundamentals, the contribution of a competitive and diversified business sector and inclusive social policies,” Mr Gurría said. “But this should be no cause for complacency, because Sweden, like any other country, still faces challenges to stimulate productivity growth, improve educational outcomes and ensure that tomorrow’s workers have the skills for thriving in a 21st century economy.”

The OECD points out that productivity growth - which is key to sustaining Sweden’s competitiveness and high employment - has slowed in recent years, due to a range of cyclical and structural factors. With Sweden close to the world’s efficiency frontier, boosting growth will require greater support for innovation and enhanced coordination of innovation, research and skills policies.

The very recent creation of an Innovation Council is welcome, but other complementary measures need to be considered. Sweden should avoid an overly narrow focus on high-tech sectors, and instead promote investment in all forms of knowledge-based capital.

Simplification of regulatory procedures, streamlining of business and land-use permits and new investment in infrastructure would improve the business environment and offer stronger foundations for growth, particularly for firms in the services sector and SMEs that will provide the jobs of the future.

With Sweden experiencing the most rapid decline of all OECD countries in the performance of 15-year-olds in the Programme for International Student Assessment (PISA), immediate action is required. Reversing the decline in educational attainment will be crucial for ensuring skills acquisition, maintaining employment and achieving more inclusive growth.

To this end, Sweden should seek to raise the attractiveness of the teaching profession, through better salaries and career paths, and consider merging some of the institutions that advise on and supervise education policy into an Education Policy Council.

With skill levels varying widely across levels of educational attainment, support should be enhanced for struggling students, notably immigrants, and resources better targeted to students’ socio-economic background. Sweden should also enhance support and incentives for immigrants to learn Swedish and achieve high educational outcomes.

Increased flexibility in entry-level wages and reducing the employment protection gap between workers on temporary and permanent contracts will also help the low-skilled get a foothold in the job market.

Source: Organization for Economic Co-operation and Development