The Swedish economy has recovered strongly in recent years with annual GDP growth expected to exceed 4% in 2006. This recovery has come sooner and been stronger than in most other European countries, illustrating the relative soundness of the Swedish economy. Inflation expectations are well anchored. This successful performance is a result of the way in which Sweden responded to the deep crisis in the early 1990s, when it greatly improved its macro policy framework. With a structural budget surplus of around 2% of GDP, Sweden is preparing itself to meet future demographic challenges much better than most OECD countries. All parts of society benefit from this forward-looking policy framework. For those employed, real wage growth has averaged 3½ per cent since 1998 when a new stability-oriented wage formation framework was introduced, compared to just 2½ per cent during the inflationary 1970s and 1980s.