Title page
Contents
Executive summary 10
1. Key policy insights 15
COVID-19 has hit the economy hard 15
Vaccines bring hope for a gradual return to normality 16
Growth is picking up but uncertainty remains high 18
Extensive policy support has mitigated the impact of the crisis 21
Public finances are robust but debt will rise with population ageing 23
Monetary and financial policy has buttressed the financial system 25
Some financial vulnerabilities remain 28
Weak money laundering controls have been an issue in some banks' foreign subsidiaries 31
Facilitating resource reallocation is essential for the recovery 33
Education policy measures are starting to bear fruit but challenges remain 37
Structural reforms could boost long-term growth 38
Wider diffusion of digitalisation would boost productivity 44
The green economy offers new growth opportunities 48
References 54
2. Keeping regional inequality in check 57
Regional inequalities are increasing albeit from a low level 59
Sweden is among the most decentralised OECD countries 63
The equalisation system compensates most differences in tax capacity and costs 66
Regions and municipalities face diverse challenges 70
The central government is increasing its support to municipalities and regions 75
Digitalisation offers opportunities to enhance public service delivery 77
Promoting regional growth and employment is essential 80
Recommendations to contain the rise in regional inequality 87
References 88
Annex 2.A. Regional differences in productivity in Sweden: insights from OECD regions 92
References 105
Table 1. The economy is bouncing back 11
Table 1.1. Macroeconomic indicators and projections 19
Table 1.2. Events that could lead to major changes in the outlook 21
Table 1.3. Cost of crisis-related budget measures in 2020 and 2021 23
Table 1.4. Crisis-related guarantees, liquidity measures and capital injections 23
Table 1.5. Main pandemic-related measures by the Riksbank 28
Table 1.6. Past recommendations on education policy and action taken 38
Table 1.7. Past recommendations on labour market policy and action taken 41
Table 1.8. Estimated impact of main recommendations (unless otherwise specified) 42
Table 1.9. Past recommendations on housing policy and action taken 44
Table 1.10. Past recommendations on business regulations and competition policies 48
Table 1.11. Past recommendations on environmental policy and action taken 51
Table 2.1. Panel regressions for labour productivity 83
Figure 1. Mobility trends in Sweden 11
Figure 2. GDP is picking up after a sharp fall 11
Figure 3. Fiscal policy is expansionary 12
Figure 1.1. GDP contracted less than in many other OECD countries 15
Figure 1.2. Activity remains very low in some sectors 16
Figure 1.3. The number of new infections has fallen only recently 17
Figure 1.4. Mobility dropped sharply during the second wave 18
Figure 1.5. Exports of goods by commodity and market 20
Figure 1.6. Government support went primarily to the most vulnerable sectors 22
Figure 1.7. The government's deficit and debt remain modest 24
Figure 1.8. Ageing will push up government debt over time in the absence of reforms 25
Figure 1.9. Zero policy rates are complemented by sizeable bond buying 26
Figure 1.10. Financial conditions have again turned supportive but the krona has appreciated 26
Figure 1.11. Inflation and inflation expectations have moved up 27
Figure 1.12. The banking system seems solid although not without vulnerabilities 29
Figure 1.13. House prices have been rising at a fast pace 30
Figure 1.14. The house price-to-income ratio is close to the OECD average but household debt is high 31
Figure 1.15. Corruption is very low 32
Figure 1.16. Tax transparency is high and anti-money laundering is relatively effective 33
Figure 1.17. There is room for improvement in the insolvency framework 34
Figure 1.18. Unemployment has risen markedly 35
Figure 1.19. Young women have seen the most persistent fall in employment 36
Figure 1.20. School results have started to improve 37
Figure 1.21. Permanent workers' employment protection is relatively strong 40
Figure 1.22. The labour tax wedge is high 40
Figure 1.23. Rent control is very strict 43
Figure 1.24. Rental regulations lead to long queues 43
Figure 1.25. Productivity gains have slowed 45
Figure 1.26. Digital gaps between small and large firms are wide 46
Figure 1.27. ICT skills need to be further improved 46
Figure 1.28. The gender gap in ICT specialists is the highest in Sweden 47
Figure 1.29. The share of women graduating in ICT is still low 48
Figure 1.30. Carbon dioxide emissions per capita are declining steadily 49
Figure 1.31. Road transport, industry and agriculture are the largest GHG emitters 50
Figure 2.1. GDP growth has varied considerably across regions 60
Figure 2.2. Real output per capita and population have diverged 61
Figure 2.3. Regional disparity remains relatively low 61
Figure 2.4. Well-being varies across regions 63
Figure 2.5. Sub-national governments make up a large part of public consumption and investment 64
Figure 2.6. Sub-national governments account for a large share of public revenue and spending 65
Figure 2.7. The share of property tax revenue is smaller than in the other Nordics 66
Figure 2.8. Equalising transfers are slightly above peer countries' average 67
Figure 2.9. Revenue equalisation is predominant in Sweden 67
Figure 2.10. The Swedish cost equalisation system is relatively complex 68
Figure 2.11. A large share of the population is concentrated in the three main cities 71
Figure 2.12. Dependency ratios are increasing and diverging across regions 72
Figure 2.13. Stockholm is one of the most innovative regions in Europe 74
Figure 2.14. Contributions to municipal spending and revenue 76
Figure 2.15. Sweden is among the world's leading countries in e-government 78
Figure 2.16. Access to high-speed broadband remains limited in rural areas 78
Figure 2.17. Productivity varies significantly across regions 81
Figure 2.18. Persistence of inequality in productivity levels within countries 81
Figure 2.19. Job creation in capital regions 82
Figure 2.20. Telework possibilities are uneven across regions 86
Boxes
Box 1.1. Main fiscal measures taken during the pandemic 22
Box 1.2. Main measures taken by the financial authorities during the crisis 27
Box 1.3. A pilot job matching programme for foreign-born women 36
Box 1.4. Potential impact of structural reforms 41
Box 2.1. Sub-national government responsibilities in Sweden 64
Box 2.2. Overview of the equalisation system and new features introduced in 2020 68
Box 2.3. The German fiscal equalisation system 69
Box 2.4. Stockholm's strategy for a smart and sustainable city: Vision 2040 74
Box 2.5. Living labs for energy transition in Germany 79
Box 2.6. What characterises OECD's most productive regions? 82
Box 2.7. Technoparks in Korea 84
Box 2.8. Regional clusters in the Netherlands 85
Annex Tables
Annex Table 2.A.1. Panel regressions for labour productivity 102
Annex Table 2.A.2. Fixed effects for Swedish regions 103
Annex Figures
Annex Figure 2.A.1. Labour productivity disparities across Swedish regions are moderate 93
Annex Figure 2.A.2. Productivity disparities between TL2 regions are wide in some sectors 94
Annex Figure 2.A.3. The density of motorways and railways varies widely across TL2 regions 94
Annex Figure 2.A.4. Broadband coverage is high across Swedish TL2 regions 95
Annex Figure 2.A.5. Access to high-speed broadband remains limited in rural areas 96
Annex Figure 2.A.6. Internet is widely used to communicate with public authorities 96
Annex Figure 2.A.7. Internet banking and e-commerce are widespread 97
Annex Figure 2.A.8. Highly productive sector firms concentrate in Stockholm and West Sweden 98
Annex Figure 2.A.9. The number of firms in knowledge-intensive services increased faster in Stockholm and West Sweden 98
Annex Figure 2.A.10. High-tech employment is concentrated in the Stockholm region 99
Annex Figure 2.A.11. R&D expenditure in the business sector is higher in highly productive regions 100
Annex Figure 2.A.12. The share of the population with tertiary education varies across regions 100
Annex Figure 2.A.13. Participation in lifelong learning is high throughout the country 101
Annex Figure 2.A.14. OECD regions with low broadband coverage are at a disadvantage 104