Newspaper article The Christian Science Monitor

Outlook Is Bleak for the Nation's Troubled Economy Series: POINTS OF THE COMPASS. Part 6 of a Series. Second of Two Articles Appearing Today

Newspaper article The Christian Science Monitor

Outlook Is Bleak for the Nation's Troubled Economy Series: POINTS OF THE COMPASS. Part 6 of a Series. Second of Two Articles Appearing Today

Article excerpt

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.

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. …

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