Each year, the European Commission reviews the economic development of the 27 Member States in order to be able to issue different types of recommendations at a later stage. The idea is that, at an early stage, countries should be able to prevent various types of risks to the economy and social development, and stop any dissemination to other member states. Everything from trade, the economy and the labor market to education and health care has been thoroughly examined in the country report on Sweden. The report is permeated with sustainability thinking and points to challenges and trends in several areas.

The EU's view of Sweden's economic development

For Sweden, the EU Commission notes that the Swedish economy has performed well, but the dampening growth prospects in the medium term require further structural reforms. However, economic growth remains positive, but is expected to slow in during the year. According to the Commission, growth in gross domestic product, GDP, at fixed prices will remain just over 1%, as there is a declining domestic demand, weak investment rate, and a sluggish global economy. But overall investment levels remain high.

Sweden receives good ratings from the Commission regarding the reduction of greenhouse gas emissions. During the period 1990–2017, Sweden's greenhouse gas emissions decreased by 26% while GDP per capita increased by 54%. Export growth, especially in services, was strong in 2019. The Commission predicts that the export rate of goods and services is likely to increase by around 2% in 2020-2021 for Sweden. The forecasts indicate that the current account surplus will rise to more than 4% of GDP.

The labor market is one of the sections in the risk zone, according to the Commission, as it has begun to weaken. The fall forecast in 2019 shows that unemployment will rise from 6.3% in 2018 to 7.2% in 2021. The labor shortage and the skills gap, which means that the vacancies and the skills of the unemployed do not match, will remain above all in the case of highly qualified jobs.

The land report mentions that Upper and Central Norrland have had low or even negative productivity growth. In addition, according to the Regional Innovation Scoreboard, Central Norrland stands out with moderate innovation ability vis-à-vis other Swedish regions with mostly strong ability, and in the case of the metropolitan regions, leading innovation capacity.

Therefore, the European Commission wants Northern Sweden to take part in the Just Transition Fund

Upper Norrland is at the bottom when it comes to the goal of reducing greenhouse gas emissions. The report mentions that the steel industry is an important industry for the region and Europe, but also a major source of greenhouse gas emissions that significantly exceeds the EU average. Even with the goal that the steel industry will become fossil-free by 2035, carbon dioxide emissions have so far increased, according to the European Commission. But adjusting to the steel industry is associated with enormous risks and possible negative consequences for the approximately 4,000 people directly employed in production, as well as further consequences for subcontractors and the entire regional economy for Upper Norrland.

The great importance of the steel industry to the economy and the people of northern Sweden is the reason for the proposal in the Commission's land report that the Just Transition Fund in Sweden during the period 2021–2027 should be directed to just Upper Norrland and facilitate the region to switch to fossil-free production, and promote diversification and development of other industries, thereby reducing both greenhouse gas emissions and the region's dependence on the steel industry. The fund will primarily take social aspects into account and help create new innovative solutions within the steel industry's value chain during the restructuring process. The fund is part of the EU's cohesion policy and will, among other things, be raised with funds from the European Regional Fund and the European Social Fund. Regional restructuring plans, together with regional smart specialization strategies, will form the basis for the efforts to be prioritized.

/Ozan Yücel & John Kostet

To read the country report in its entirety, click here