Outlook is Bleak for the Nation's Troubled Economy

By , Special to The Christian Science Monitor

SWEDEN is losing ground in the ever more competitive world market. And the economic outlook is not good. ``The Swedes were the richest people in the world in 1975. Today we are not even among the top ten,'' says Magnus Blomstrom, professor at the Stockholm School of Economics. ``Our economy is still growing, but too darned slowly, and our international competitiveness has declined.''

Sweden lost more than 20 percent of its share of world exports of manufactured goods between the mid-1960s and the mid '80s. Its share of the world market for manufactured products decreased almost 5 percent in 1989 alone. The Ministry of Finance expects a continued loss of market share. The deterioration of the current account deficit in 1989 was the largest in the 1980s.

Economists are predicting a further rapid decline in coming years.

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Sweden's economic problems are many.

Inflation is more than 10 percent. Labor costs are also high. The overall wage increase last year was 9.5 percent, almost twice the increase in the rest of the world. Labor productivity is not keeping up with labor-cost increases. The overall economic growth rate is low, only 1 percent this year.

Although Finance Minister Allan Larsson does not dispute the gloomy figures, he says that ``the foundation of our economy is strong.'' And he adds that many important improvements are planned. A radical tax reform, to take effect on Jan. 1, will lower the maximum tax rate to 50 percent from as high as 80 percent now.

The tax reform will make it more worthwhile to work by allowing Swedes to keep more of their incomes.

But the opposition parties complain that the total tax burden will not decrease, since indirect taxes (those levied through companies) such as value-added taxes, will increase instead. The value-added tax is now 25 percent on all goods, including food.

In addition, there is a consensus that the public sector must be reduced and reformed.

``For 50 years, we successfully solved problems by incorporating them into the public sector and raising taxes,'' says P-O Edin, chief economist at the Swedish Trade Union Confederation. ``We can't do that any longer.''

The public sector is large and inefficient; there are often long waits for social services and many who would like day care for their children can't get it. Public sector expenditures today account for about 60 percent of the gross national product, which is 20 percent larger than in other West European countries.

And finally, Swedish industry, whose exports are the backbone of the economy, must solve several problems if it wants to continue to be competitive, says Bjorn Svedberg, chairman of Ericsson, the telecommunications giant.

``We must solve our high costs, we must make a decision about our relations with the European Community, and we must solve our energy problems,'' explains Mr. Svedberg. He favors both future Swedish membership in the Community and the continued use of nuclear power in Sweden.

Sweden's nuclear power industry is scheduled to be dismantled by the year 2010, but the government has not outlined definite power alternatives and it is uncertain that the decision will be carried out.

Economic policy depends on who will govern in coming years.

It's far from certain that the Social Democrats will retain power after next year's elections. Political instability is relatively new here and scares many. But is there an opposition alternative?

The opposition parties don't have a joint program and none has enough support to be elected on its own. A government coalition of three parties to the right of the Social Democrats governed from 1976 to 1982, but it was unsuccessful.

This does not bode well for such a coalition today.

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