The Sweden economy is modern and highly industrialised. It has a modern distribution system, excellent internal and external communications, and a skilled labor force. Timber, hydropower, and iron ore constitute the resource base of an economy heavily oriented toward foreign trade. The main industries include motor vehicles, telecommunications, pharmaceuticals and forestry.
Aided by peace and neutrality for the whole of the 20th century, Sweden has achieved an excellent standard of living under a mixed system of high-tech markets and extensive welfare benefits. The country is known for its high taxes and large public sector. Sweden has the second highest total tax revenue behind Denmark, as a share of the country's income. As of 2007, total tax revenue was 47.8% of GDP, down from 49.1% 2006
Sweden is an export-oriented market economy featuring a modern distribution system, excellent internal and external communications, and a skilled labor force. Timber, hydropower, and iron ore constitute the resource base of an economy heavily oriented toward foreign trade. Sweden's engineering sector accounts for 50% of output and exports. Telecommunications, the automotive industry and the pharmaceutical industries are also of great importance. Agriculture accounts for 2 percent of GDP and employment.
The 20 largest Sweden-registeredd companies by turnover in 2007 were Volvo, Ericsson, Vattenfall, Skanska, Sony Ericsson Mobile Communications AB, Svenska Cellulosa Aktiebolaget, Electrolux, Volvo Personvagnar, TeliaSonera, Sandvik, Scania, ICA, Hennes & Mauritz, Nordea, Preem, Atlas Copco, Securitas, Nordstjernan, and SKF. Sweden's industry is overwhelmingly in private control; unlike some other industrialized Western countries, such as Austria and Italy, publicly owned enterprises were always of minor importance.
Some 4.5 million residents are working, out of which around a third with tertiary education. GDP per hour worked is the world's 9th highest at 31 USD in 2006, compared to 22 USD in Spain and 35 USD in United States. According to OECD, deregulation, globalization, and technology sector growth have been key productivity drivers. GDP per hour worked is growing 2½ per cent a year for the economy as a whole and trade-terms-balanced productivity growth 2%. Sweden is a world leader in privatized pensions and pension funding problems are relatively small compared to many other Western European countries. Swedish labor market has become more flexible, but it still has some widely acknowledged problems. The typical worker receives only 40% of his income after the tax wedge. The slowly declining overall taxation, 51.1% of GDP in 2007, is still nearly double of that in the United States or Ireland. State and municipal bureaucrats amount to a third of Swedish workforce, multiple times the proportion in many other countries. Overall, GDP growth has been fast since reforms in the early 1990s, especially in manufacturing.
World Economic Forum 2008 competitiveness index ranks Sweden 4th most competitive, behind Denmark. The Index of Economic Freedom 2008 ranks Sweden the 27th most free out of 162 countries, or 14th out of 41 European countries. Sweden ranked 9th in the IMD Competitiveness Yearbook 2008, scoring high in private sector efficiency. According to the book, The Flight of the Creative Class, by the U.S. economist, Professor Richard Florida of George Mason University, Sweden is ranked as having the best creativity in Europe for business and is predicted to become a talent magnet for the world’s most purposeful workers. The book compiled an index to measure the kind of creativity it claims is most useful to business — talent, technology and tolerance. Sweden's investment into research and development stood, in 2007, at over 3.5% of GDP. This is considerably higher than that of a number of MEDCs, including the United States, and is the largest among the OECD members.
Swedes have rejected euro in a popular vote and Sweden maintains its own currency, the Swedish krona (SEK). The Swedish Riksbank—founded in 1668 and thus making it the oldest central bank in the world — is currently focusing on price stability with its inflation target of 2%. According to Economic Survey of Sweden 2007 by OECD, the average inflation in Sweden has been one of the lowest among European countries since the mid-1990s, largely because of deregulation and quick utilization of globalization.
The largest trade flows are with Germany, United States, Norway, United Kingdom, Denmark, and Finland.
The Swedish economic picture has brightened significantly since the severe recession in the early 1990s. Growth has been strong in recent years, and even though the growth in the economy slackened between 2001 and 2003, the growth rate has picked up since with an average growth rate of 3.7% in the last three years. The long-run prospects for growth remain favorable. The inflation rate is low and stable, with projections for continued low levels over the next 2-3 years.
Since the mid-1990s the export sector has been booming, acting as the main engine for economic growth. Swedish exports also have proven to be surprisingly robust. A marked shift in the structure of the exports, where services, the IT industry, and telecommunications have taken over from traditional industries such as steel, paper, and pulp, has made the Swedish export sector less vulnerable to international fluctuations. However, at the same time the Swedish industry has received less money for its exports while the import prices have gone up. During the period 1995-2003 the export prices were reduced by 4% at the same time as the import prices climbed by 11%. The net effect is that the Swedish terms-of-trade fell 13%.