After a relatively strong performance during and after the pandemic, short-term growth prospects are weak. High inflation has eroded real wages and tighter monetary policy has increased borrowing costs and led to a housing price correction. Macroeconomic policies should ensure that higher inflation does not become entrenched. Better matching skills to labour demand, loosening rent controls and improving the integration of disadvantaged groups into the labour market could further boost employment and lay the ground for an inclusive recovery. Income taxation and the social safety net could also better incentivise work, in the context of population ageing and mounting spending pressures ahead. Sweden is among the OECD’s best performers in reducing greenhouse gas emissions, with a comprehensive policy framework and relatively efficient policies. However, the decision to reduce biofuel blending requirements will likely move the 2030 reduction target out of reach unless compensated by new ambitious measures. Completing a nascent green industrial revolution will require considerable investments in electricity generation, storage and transmission, but long planning and permitting procedures slow many key projects down. Attracting the people and skills to run industry and complementary public services is a particular challenge for northern communities already facing labour shortages.

SPECIAL FEATURES: CLIMATE POLICIES AND SWEDEN’S GREEN INDUSTRIAL REVOLUTION