Sweden is a Scandinavian country found in the northern parts of Europe and is widely known for its welfare state. The country is divided into 25 provinces with a total population of 9.3 million people. Sweden is Europe’s fourth largest country and covers an area of 449964 square kilometers. By the year 2009, the annual population growth rate was reported to be 0.82%.The country has an average life expectancy of 80.86 years with a total fertility rate of 1.94 children per woman.
Just like other Nordic countries, Sweden has a mixed economy welfare state (Freeman, 2010). Sweden is an industrialized country whose major exports include motor vehicles, machinery and forest products. Sweden’s industrial development has been facilitated by the country’s enormous iron ore deposits. The country also prides itself of large forest reserves and hydroelectric power. Both production and service industries are major contributors to Sweden’s Gross Domestic Product (GDP) (Freeman, 2010). The current per capita income is approximately $455.8 with an annual GDP growth rate at 5.5%. This paper will analyze the macroeconomic state of Sweden.
Sweden has an inflation rate of 1.4% according to the 2010 economic report. The country has a wealth of natural resources that has made Sweden to be among the major economic forces in Europe. Some of the natural resources found in Sweden include timber, uranium, copper, iron ore, silver and a large forest cover (Freeman, 2010). Agricultural and fishing industries make a contribution of approximately 1.7% to the country’s GDP. Sweden has approximately 9 million acres of arable land which makes it a major exporter of Agricultural goods in Europe. Apart from the European market, Sweden also exports its Agricultural and industrial products to America and Asia (Steil, 2002). Some of Sweden’s major agricultural exports include potatoes, sugar beets, meat, dairy products and grains.
The large forest cover in Sweden makes the country a major exporter of timber and its products. Industrial production contributes significantly to Sweden’s economy forming approximately 26.5% of Sweden’s GDP. The major industrial products include machinery, metal products, processed foods, paper products, aircrafts and electrical equipment. Sweden has a stable service industry that forms 72.2 % of the country’s GDP (Steil, 2002). The service industry thrives from the fact that Sweden is an industrial country and most of the products needed in the service industry are produced within the country. Sweden is one of the best countries around the world in biotechnology and its ability to produce electronic equipment has also made the telecommunications industry to thrive (Bosworth, 1987). The country is among the leading producers of computer equipment in Europe and this is reflected by the contribution of the service industry to the country’s GDP.
Sweden recorded a return of U.S. $102.9 billion from exports in 2010. 44.1 % of this amount was from machinery and transport equipment exports. Agricultural and timber products also performed well and formed 25% of the total returns from exports. Minerals and mineral products accounted for 10% of the total returns with electric current forming 8.1 % (Acs, 2011). Germany and Finland are the major trading partners with Sweden and are the major destinations of Sweden’s exports. In the year 2010, Sweden spent approximately U.S. $92.2 billion on imports. The majority of Sweden’s imports include transport and machinery equipment. The country also imports textiles and chemicals for industrial use. Some of the major countries that Sweden imports goods from include Germany, Norway, China, Russia and Finland.
Sweden’s GDP experienced a very low growth rate from early 1970s to late 1980s before dropping significantly between 1990 and 1993. The country then experienced a steady growth rate of its GDP between 1998 to the 2000 which was impressive compared to other countries across Europe (Steil, 2002).
The percentage growth rate of Sweden’s Gross Domestic Product was approximately 4% per year. Sweden was then affected by the 2000 IT-crash like other developed countries and this led to a sharp economic downturn (Steil, 2002). The growth rate dropped from 4.45% in early 2000 to 1.26% in 2001. This economic setback was very devastating and it took the country almost two years to recover from the economic recession. The year 2004 saw the return of an economic boom due to an increase in international trade. The period between 2004 and 2006 was very good for Sweden’s economy because the country increased its exports due to the booming world trade (Acs, 2011). The rapid export growth for Sweden led to an annual increase in the growth rate of the country’s Gross Domestic Product to approximately 4% between 2004 and 2006.
In the beginning of 2007, Sweden once again experienced a financial crisis that led to a slow economic growth. The country experienced a deep recession from early 2007 to late 2008 and this subsequently affected the country’s GDP growth rate. The annual GDP growth rate dropped to -0.61% in 2008 from 3.31% in the beginning of 2007. The GDP growth rate dropped further in 2009 to the worst figure of -5.33%. The year 2010 saw a quick recovery from the economic recession and for the first time the GDP growth rate reached a high of 5.69% (Acs, 2011).
The real and nominal GDP is always affected by the country’s monetary polices. There is always a difference in the growth of nominal and real GDP (Freeman, 2010). Since nominal GDP bases its value on the current market prices, it is always difficult to have the same growth rates because the real GDP is calculated using the prices of the base year (Bosworth, 1987). Sweden does level targeting of the nominal GDP because it includes past deviations in its target.
The growth rate of Sweden’s nominal GDP illustrates a catch- up growth rate as opposed to the real GDP growth rate (Carlsson, 1997). The economic recession that was experienced between early 2000 and late 2003 led to a drop in the growth rate of the nominal GDP to -1.76%. The IT-crash slowed the economy a great deal but the real GDP was not affected to that extend (Freeman, 2010). The nominal growth rate shot up by almost 4% in the period between 2004 and 2007. The real annual GDP growth rate remained at 3.81%. This economic boom was influenced by the increase in international trade that favored a nominal growth rate. There was an increase in annual growth rates between early 2009 and late 2010 as the country came out of a recession that had been experienced in 2008 (Freeman, 2010). In the 2008 economic recession, the real and nominal growth rates dropped to 2.3 % and 1.9% respectively (Acs, 2011).
Nominal spending collapsed in the period between early 2008 and early 2009 which led to a drop in economic growth rate. Sweden had to increase its nominal spending by almost 10% in the last quarter of 2009 and all the quarters of 2010. Nominal GDP is always elevated compared to real GDP but its growth has been slowing down in the recent past (Freeman, 2010). The Riskbank has been instrumental in promoting Sweden’s nominal GDP growth rate. Real GDP growth rate has been increasing significantly because it includes catch-up growth. It is important to note that the nominal GDP growth rate is essential in determining whether the economy of a particular country is growing at the expected rate (Bosworth, 1987).
Demand and supply aggregate is a very important factor in the economic growth of a country. A decrease in aggregate supply causes inflation that in turn slows the growth rate of a country’s Gross Domestic Product (Carlsson, 1997). Increased aggregate supply means that the inflation rate will be very low and surplus goods will be available for export. Sweden‘s economy depends on the returns from exports and a decrease in the supply aggregate is a major blow to the country’s GDP (Carlsson, 1997). Increased demand aggregate on the other hand causes inflation while a decrease in demand aggregate favors the country because low inflation rates are reported. The supply aggregate of agricultural and timber products has been on the increase since early 2009 and that is the reason why there has been a steady increase in the country’s nominal and real GDP
(Freeman, 2010). Sweden’s real GDP has a great potential to grow because the country has fully recovered from the 2009 economic recession and its exports are doing well at the international market.
References
Acs, Z., 2011. Global entrepreneurship and development index 2011. New York, NY: Edward Elgar Publishing. Web.
Bosworth, B., 1987. The Swedish economy. London: Brookings Institution Press. Web.
Carlsson, B. 1997. Technological systems and industrial dynamics. New York, NY: Springer. Web.
Freeman, R., 2010.Reforming the welfare state: Recovery and beyond Sweden. Chicago, IL: University of Chicago Press. Web.
Steil, B., 2002. Technological innovation and economic performance. New York, NY: Princeton University Press. Web.