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The Economic Cooperation Organization, OECD expects Sweden's GDP growth to fall to 1.2 percent this year, down from 3.9 percent in 2011. It recommends that Sweden should higher property taxes among other as one of the tools to drive the economy forward.
"The Swedish economy has exhibited resilience in the face of international turbulence, thanks to sound macroeconomic policies and substantial structural reforms carried out since the early 1990s," the OECD writes in its economic survey of Sweden published on Monday.
The OECD continues that the main challenge going forward is to maintain robust trend growth and make it more inclusive and stable against the backdrop of a weak and uncertain external environment. Maintaining a high level of welfare will help in pushing ahead with reforms.
The OECD expects a gradual recovery thereafter, with growth of 1.9 percent in 2013 and 3.0 percent in 2014, in its evaluation of the Swedish economy.
Unemployment is expected to peak at 7.9 percent on average in 2013 after rising to 7.7 percent this year. In 2014, the OECD expects that unemployment in Sweden will drop to 7.6 percent.
However, the OECD also criticised Sweden for certain aspects such as the taxation of real estate should increase, partly to reduce the risk of a housing crash.
"Low property taxes have contributed to the increase in house prices. Though politically difficult, taxes on owner-occupied housing should be raised to better align the taxation of this type of asset with that of other assets."
"Since a large part of the price rise can be explained by fundamental factors such as higher real incomes and lower interest rates, it is far from clear that Sweden has a housing bubble. But the long-term price increase implies a risk that prices may fall properly, just as in many other OECD countries "
The OECD is worried that there is a group of individuals that are cut off the labour market. They would want to see a more integrated labour market. It acknowledged that recent labour market performance has been better in Sweden than in many other countries. Nevertheless, some groups such as youth with limited education, some immigrants, and those on sickness and disability benefits are not well integrated.
Lower minimum wages relative to the average wage for groups at risk of becoming unemployed, a more efficient vocational and education system, active labour market policies better targeted to individual needs, combined with the existing earned‑income tax credit would help these groups find a job and escape the risk of poverty. To the extent that these groups might be trapped in temporary contracts, it will be important to reduce the gap in job protection between temporary and permanent contracts.
The OECD also want to lower the minimum wage to increase employment among those who have the greatest difficulty in entering the labour market.
Housing is anther area the OCECD thinks will harm the Swedish economy in the future. "Rapidly growing demand has not been met with adequate supply, especially in urban areas, which potentially has dampened labour mobility." Slow planning processes, high construction costs, and weak incentives for municipalities to obtain land is identified as some of the causes.
Addressing the structural problems in the housing market would ensure adequate housing supply, reducing the risks associated with house prices, which have increased substantially in recent years and are high by historical standards. This would require continuing with reforms to raise the supply of rental apartments, to simplify and shorten the building process and to intensify competition in the construction
sector. These reforms would have co-benefits as they may enhance welfare and encourage labour mobility.
Lastly, the OECD believe that the Swedish banking system is too large and entails risks and potential costs.
Read more of the OECD report here
By Scancomark.com Team
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OECD Calls for Sweden to raise property taxes and to integrate the job market more if it wants to strengthen its economy more
Monday, 17 December 2012The Economic Cooperation Organization, OECD expects Sweden's GDP growth to fall to 1.2 percent this year, down from 3.9 percent in 2011. It recommends that Sweden should higher property taxes among other as one of the tools to drive the economy forward.
"The Swedish economy has exhibited resilience in the face of international turbulence, thanks to sound macroeconomic policies and substantial structural reforms carried out since the early 1990s," the OECD writes in its economic survey of Sweden published on Monday.
The OECD continues that the main challenge going forward is to maintain robust trend growth and make it more inclusive and stable against the backdrop of a weak and uncertain external environment. Maintaining a high level of welfare will help in pushing ahead with reforms.
The OECD expects a gradual recovery thereafter, with growth of 1.9 percent in 2013 and 3.0 percent in 2014, in its evaluation of the Swedish economy.
Unemployment is expected to peak at 7.9 percent on average in 2013 after rising to 7.7 percent this year. In 2014, the OECD expects that unemployment in Sweden will drop to 7.6 percent.
However, the OECD also criticised Sweden for certain aspects such as the taxation of real estate should increase, partly to reduce the risk of a housing crash.
"Low property taxes have contributed to the increase in house prices. Though politically difficult, taxes on owner-occupied housing should be raised to better align the taxation of this type of asset with that of other assets."
"Since a large part of the price rise can be explained by fundamental factors such as higher real incomes and lower interest rates, it is far from clear that Sweden has a housing bubble. But the long-term price increase implies a risk that prices may fall properly, just as in many other OECD countries "
The OECD is worried that there is a group of individuals that are cut off the labour market. They would want to see a more integrated labour market. It acknowledged that recent labour market performance has been better in Sweden than in many other countries. Nevertheless, some groups such as youth with limited education, some immigrants, and those on sickness and disability benefits are not well integrated.
Lower minimum wages relative to the average wage for groups at risk of becoming unemployed, a more efficient vocational and education system, active labour market policies better targeted to individual needs, combined with the existing earned‑income tax credit would help these groups find a job and escape the risk of poverty. To the extent that these groups might be trapped in temporary contracts, it will be important to reduce the gap in job protection between temporary and permanent contracts.
The OECD also want to lower the minimum wage to increase employment among those who have the greatest difficulty in entering the labour market.
Housing is anther area the OCECD thinks will harm the Swedish economy in the future. "Rapidly growing demand has not been met with adequate supply, especially in urban areas, which potentially has dampened labour mobility." Slow planning processes, high construction costs, and weak incentives for municipalities to obtain land is identified as some of the causes.
Addressing the structural problems in the housing market would ensure adequate housing supply, reducing the risks associated with house prices, which have increased substantially in recent years and are high by historical standards. This would require continuing with reforms to raise the supply of rental apartments, to simplify and shorten the building process and to intensify competition in the construction
sector. These reforms would have co-benefits as they may enhance welfare and encourage labour mobility.
Lastly, the OECD believe that the Swedish banking system is too large and entails risks and potential costs.
Read more of the OECD report here
By Scancomark.com Team
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