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Sweden: Market Profile

Picture: Sweden factsheet
Picture: Sweden factsheet

1. Overview

Sweden has been able to reach high-income status via free-market policies and an extensive welfare system has contributed to high standards of living. Sweden's long-successful economic formula of a capitalist system combined with substantial welfare elements was challenged in the 1990s by high unemployment and in 2000 through 2002 and again in 2009 by the global economic downturns, but fiscal discipline over the past several years has allowed the country to weather economic vagaries. Although the country is a member of the European Union (EU), Sweden continues making use of the krona instead of the euro which provides Stockholm with greater monetary policy flexibility compared to regional peers. It has a modern distribution system, excellent internal and external communications, and a skilled labour force. Timber, hydropower, and iron ore constitute the resource base of an economy heavily-oriented toward foreign trade. Privately owned firms account for about 90% of industrial output, of which the engineering sector accounts for almost half of output and exports. Agriculture accounts for little more than 1% of GDP and of employment. Despite the reliance on exports, the country’s labour is largely centred upon services. Industry, however, contributes more to the country’s national output (in relation to labour) than both services and agriculture.

Sources: World Bank, Fitch Solutions, CIA World Factbook, the Observatory of Economic Complexity

2. Major Economic/Political Events and Upcoming Elections

September 2018
Sweden held general elections, coinciding with both municipal and regional elections. The election resulted in a hung parliament, as no governing bloc (between the Reds-Greens and The Alliance coalitions) were able to secure more than 50% of seats needed to form government.

Prime Minister Stefan Löfven (elected in 2014) lost the motion of confidence after the election, but remained as a caretaker government until a government could be formed.

January 2019
After numerous negotiations and nominations, the Social Democrats, the Greens, the Centre Party and the Liberals agreed upon a deal to allow Stefan Löfven to continue as Prime Minister. Löfven was nominated and approved by the Riksdag (the state’s unicameral legislature) on January 18, 2019.

September 2022
Sweden will be due to hold general election to choose representatives in the Riksdag.

Sources: BBC Country Profile – Timeline, Fitch Solutions

3. Major Economic Indicators

Graph: Sweden real GDP and inflation
Graph: Sweden real GDP and inflation
Graph: Sweden GDP by sector (2018)
Graph: Sweden GDP by sector (2018)
Graph: Sweden unemployment rate
Graph: Sweden unemployment rate
Graph: Sweden current account balance
Graph: Sweden current account balance

e = estimate, f = forecast
Sources: IMF, World Bank, Fitch Solutions
Date last reviewed: July 17, 2019

4. External Trade

4.1 Merchandise Trade

Graph: Sweden merchandise trade
Graph: Sweden merchandise trade

Source: WTO
Date last reviewed: July 17, 2019

Graph: Sweden major export commodities (2018)
Graph: Sweden major export commodities (2018)
Graph: Sweden major export markets (2018)
Graph: Sweden major export markets (2018)
Graph: Sweden major import commodities (2018)
Graph: Sweden major import commodities (2018)
Graph: Sweden major import markets (2018)
Graph: Sweden major import markets (2018)

Sources: Trade Map, Fitch Solutions
Date last reviewed: July 17, 2019

4.2 Trade in Services

Graph: Sweden trade in services
Graph: Sweden trade in services

e = estimate
Source: WTO
Date last reviewed: July 17, 2019

5. Trade Policies

  • Sweden has been a WTO member since January 1, 1995 and a member of GATT since April, 1950. The country has also been a member of the EU since January 1995.

  • Sweden applies the EU's Common External Tariff, which means goods manufactured and imported from within the EU are not subject to customs charges. The average tariff rate for EU states is just 1.57%, which is among the lowest globally. The duties for non-European countries are also relatively low, especially for manufactured goods (4.2% on average). However, textile, clothing items (high duties and quota system) and food-processing industry sectors (average duties of 17.3% and numerous tariff quotas) still see protective measures. Most of the country's major trade partners are within the EU, hence risks are less pronounced.

  • The EU has imposed various anti-dumping measures on a wide range of products. As of Q319, the EU and EC apply anti-dumping duties on 52 product categories, affecting 15 states. The EU imposes anti-dumping duties on 30 categories of products from Mainland China and a few other Asian nations, predominantly in the areas of textiles, parts, steel, iron and machinery.

  • In 2016, the EC introduced an import licensing regime for steel products exceeding 2.5 tonnes. The regulation will be active until May 15, 2020.

  • On January 1, 2017, the EU imposed additional import duties on certain fruit and vegetables if the quantity of the goods exceeds the trigger volume level within the specified application period. As of January 2019, the EC has applied additional import duties on certain fruit and vegetables from Brazil, Israel, South Africa, Peru, Morocco, Egypt, India, Chile and Argentina.

  • 73 countries have tariffs products affected by EU and/or EC tariffs; 631 products exported by Mainland China have tariffs placed upon them; 18 products exported by Hong Kong have EU tariffs placed upon them as of Q319.

  • The EU imposes import quotas on rice imports from Cambodia, India, United States, Pakistan and Thailand.

  • Beyond industry-specific subsidies, Sweden does not apply any additional restrictions.

Sources: WTO – Trade Policy Review, Fitch Solutions

6. Trade Agreement

6.1 Multinational Trade Agreements

Active

  1. The EU Common Market: The transfer of capital, goods, services and labour between member nations enjoy free movement. The common market extends to the 28 member nations of the EU, namely: Austria, Belgium, Bulgaria, Croatia, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom.

  2. European Economic Area-European Free Trade Association (Iceland, Liechtenstein, Norway and Switzerland): While it enhances trade flows between these countries and the EU, only Switzerland is a fairly major trading partner.

  3. EU-Turkey: The customs union within the EU provides tariff-free access to the European market for Turkey, benefitting both exporters and importers.

  4. EU-Japan Economic Partnership Agreement (EPA): In July 2018, the EU and Japan signed a trade deal that promises to eliminate 99% of tariffs that cost businesses in the EU and Japan nearly EUR1 billion annually. According to the EC, the EU-Japan EPA will create a trade zone covering 600 million people and nearly a third of global GDP. The result of four years of negotiation, the EPA was finalised in late 2017 and came into force on February 1, 2019 after the EU Parliament ratified the agreement in December 2018. The total trade volume of goods and services between the EU and Japan is an estimated EUR86 billion. The key parts of the agreement will cut duties on a wide range of agricultural products and it seeks to open up services markets, particularly financial services, e-commerce, telecommunications and transport. Japan is the EU's second biggest trading partner in Asia after Mainland China. EU exports to Japan are dominated by motor vehicles, machinery, pharmaceuticals, optical and medical instruments, and electrical machinery.

  5. EU-SADC EPA (Botswana, Lesotho, Mozambique, Namibia, South Africa and Swaziland): An agreement between EU and SADC delegations was reached in 2016 and is fully operational for SADC members following the ratification of the agreement by Mozambique. The remaining six members of SADC not included in the deal (the Democratic Republic of the Congo, Madagascar, Malawi, Mauritius, Zambia and Zimbabwe) are seeking EPAs with the EU as part of other trading blocs – such as with East or Central African communities.

Provisionally Active

  1. The Comprehensive Economic and Trade Agreement (CETA): The CETA is an agreement between the EU and Canada. CETA was signed in October 2016 and ratified by the Canadian House of Commons and EU Parliament in February 2017. However, as of July 2019, the agreement has not been ratified by every European state and has only provisionally entered into force. The following EU countries have ratified CETA, making the agreement provisionally active for these states: Austria, Czech Republic, Denmark, Estonia, Spain, the United Kingdom, Croatia, Lithuania, Latvia, Malta, Portugal, Sweden and Finland. CETA is expected to strengthen trade ties between the two regions, having come into effect in 2016. Some 98% of trade between Canada and the EU will be duty free under CETA. The agreement is expected to boost trade between partners by more than 20%. CETA also opens up government procurement. Canadian companies will be able to bid on opportunities at all levels of the EU government procurement market and vice versa. CETA means that Canadian provinces, territories and municipalities are opening their procurement to foreign entities for the first time, albeit with some limitations regarding energy utilities and public transport.

  2. EU-Central America Association Agreement (Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica, Panama, Belize and the Dominican Republic): An agreement between the parties was reached in 2012 and is awaiting ratification (29 of the 34 parties have ratified the agreement as of July 2019). The agreement has been provisionally applied since 2013, with the agreement being provisionally implanted among signatories.

Ratification Pending

  1. EU-Singapore Free Trade Agreement (FTA) (EUSFTA): On February 13, 2019, the European Parliament passed the agreement which would see the creation of the EUSFTA. However, before the agreement is implemented, all the states involved will need to ratify the agreement through their individual legislatures; in this case, the FTA may become provisionally active along the lines of states which have already ratified the agreement.

  2. EU-Vietnam FTA: In July 2018, the EU and Vietnam agreed on final texts for the EU-Vietnam FTA and the EU-Vietnam Investment Protection Agreement (IPA). On June 30, 2019, the relevant parties signed the agreement on both the trade agreement and the investment protection agreement. The signed agreements will be presented to both the EU and Vietnamese parliaments, as well as the individual parliaments of EU members, for ratification.

  3. EU-MERCOSUR FTA: After 19 and a half years, a deal to establish the FTA was agreed upon on June 28, 2019. The signed agreements will be presented to the parliaments of the affected states (EU and MERCOSUR members), as well as to the EU Parliament, for ratification before coming into effect. MERCOSUR consists of Argentina, Brazil, Paraguay and Uruguay (Venezuela’s membership has been suspended).

Under Renegotiation

  1. EU-Australia: The EU, Australia's second largest trade partner, has launched negotiations for a comprehensive trade agreement with Australia. Bilateral trade in goods between the two partners has risen steadily in recent years, reaching almost EUR48 billion in 2017, and bilateral trade in services added an additional EUR27 billion. The negotiations aim to remove trade barriers, streamline standards and put European companies exporting to or doing business in Australia on equal footing with those from countries that have signed up to the Trans-Pacific Partnership or other trade agreements with Australia. The Council of the EU authorised opening negotiations for a trade agreement between the EU and Australia on May 22, 2018.

  2. EU-United States (Trans-Atlantic Trade and Investment Partnership): This agreement was expected to increase trade and services, but it is unlikely to pass under the Trump administration in the United States against the backdrop of rising global trade tensions.

Sources: WTO Regional Trade Agreements Database, Fitch Solutions

7. Investment Policy

7.1 Foreign Direct Investment

Graph: Sweden FDI stock
Graph: Sweden FDI stock
Graph: Sweden FDI flow
Graph: Sweden FDI flow

Source: UNCTAD
Date last reviewed: July 17, 2019

7.2 Foreign Direct Investment Policy

  1. The Swedish Trade and Investment Council is available to investors seeking to invest and expand into Sweden. The council provides support structures and services to foreign investors, such as:

    • Establishment support
    • Market and industry insights
    • Partner and competence search
    • Site selection
    • Identifying business opportunities

  2. Generally, very few restrictions are in place against foreign investors. The supply of military equipment to the Finnish military requires permits, often limiting the number of foreign participants; similar restrictions may be present in other sectors according to industry regulations.

  3. Monopolies in the post and delivery industries present high-entry barriers for FDI. The construction and food wholesale industries also have high entry barriers due to the presence of large, dominant players.

  4. Businesses and investors are able to draw upon the International Chamber of Commerce (ICCWBO) and the International Center for Settlement of Investment Disputes (ICSID) in instances where arbitration is needed.

  5. The Swedish government will provide financial assistance and incentives to businesses in targeted depressed areas. Regional support programs – such as location and employment grants, low rent industrial parks, and economic free zones – are available, mostly targeting the country’s less-densely populated northern regions.

  6. Sweden is party to 64 active bilateral investment treaties (BITs), including one with both Mainland China and Hong Kong (agreed upon in 1994). An additional three BITs have been signed but are not in force.

  7. The EU has in place 56 active Treaties with Investment Provisions (TIPs) with entities such as:

    • MERCOSUR
    • Association of South-East Asian Nations (ASEAN)
    • Central American Common Market (CACM)
    • Caribbean Community (CARICOM)
    • Economic Community of West African States (ECOWAS)
    • Gulf Cooperation Community (GCC)
    • SADC
    • Common Market For East And Southern Africa (COMESA)
    • East African Community (EAC)
    • West African Economic and Monetary Union (WAEMU)
    • African Union (AU)
    • Mainland China and Macao

  8. Sweden ensures that land and property owners receive fair compensation in the case of expropriation – done in a non-discriminatory manner under legal guidelines; however, such cases are rare.

Sources: WTO – Trade Policy Review, Fitch Solutions

7.3 Free Trade Zones and Investment Incentives

Free Trade Zone/Incentive ProgrammeMain Incentives Available
Free ZonesFree zones, with bonded warehouses, are available in the ports of Stockholm, Göteborg, Malmö and Jönköping.
Regional subsidiesSubsidies are available to companies based in different regions. These subsidies fall into one of two categories – depending on which region the company is operational in. Zone 1 subsidies are capped at 35%; Zone 2 subsidies are capped at 20%.
Foreign tax creditAllowed up to a limit equal to the corresponding amount in Sweden on foreign income. Countries with double taxation treaties may have different standards and agreements.

Unused credits may be brought forward by a maximum of five years.
Foreign dividend paymentDividends paid to foreign owners by subsidiaries in Sweden are not subject to Swedish withholding tax rates.

Sources: US Department of Commerce, Fitch Solutions

8. Taxation – 2019

  • Value Added Tax: 25%
  • Corporate Income Tax: 21.4%

Source: Skatteverket

8.1 Important Updates to Taxation Information

The corporate income tax (CIT) rate has been reduced to 21.4% from 22%, applicable to financial years between December 31, 2018 and December 31, 2020.

8.2 Business Taxes

Type of TaxTax Rate and Base
CIT21.4%
VAT- standard rate: 25%
- 12% for, among others, foodstuffs and certain tourist sector activities
- 6% for, among others, newspapers, periodicals and domestic passenger transport
- 0% for certain medicines, aircraft fuel and gold held for investment purposes
Withholding Tax
Royalties: 0%
Dividends: 30% to nonresidents (exemptions do exist)
Interest: 0%
Transfer Tax0%
Stamp duty- 4.25% on real estate
- 0.4%-2.0% for mortgage loans
Payroll Tax: Social security31% (rate is reduced for employees over the age of 65)

Source: Skatteverket
Date last reviewed: July 17, 2019

9. Foreign Worker Requirements

9.1 Work Permit

EU member citizens do not require a work permit, but their employer must inform the job office about their employment. Citizens of the European Economic Area (with EU member states, Iceland, Norway and Lichtenstein) and Switzerland do not require a visa to enter, reside and work in the country.

No work permit is needed by foreigners from outside the EU if they have a permanent residence or family reunion permit, have been granted asylum, study in the country or have blue or green cards.

9.2 Obtaining Foreign Worker Permits

Individuals from non-EU countries require residence and work permits. The procedure to be granted a work permit includes a review of the local job market to ensure that there is no Finnish or EU job seekers available to fulfil the position. Employers must first apply for a permit to hire foreign workers. The vacant position must be reported to the local district Labour Office and cannot be changed at a later stage to fit the profile of a potential employee. The candidate must then apply for a work permit. The government issues the permit for a maximum of two years, which can be repeatedly prolonged, but always for a maximum of two years, and may be renewed as many times as needed. The permit process takes an average of one month.

9.3 Blue Card

Intended for the stay of a highly qualified employee. A foreigner holding a blue card may reside in the country and work in the job for which the blue card was issued, or change that job under the conditions defined. High qualification means a duly completed university education or higher professional education which has lasted for at least three years. The blue card is issued with the term of validity three months longer than the term for which the employment contract has been concluded, but for the maximum period of two years. The blue card can be extended. One of the conditions for issuing the blue card is a wage criterion – the employment contract must contain gross monthly or yearly wage at least at the rate of 1.5 multiple of the gross average annual wage.

Sources: Europa.eu, Fitch Solutions

10. Risks

10.1 Sovereign Credit Ratings


Rating (Outlook)Rating Date
Moody's
Aaa (Stable)
02/03/2018
Standard & Poor'sAAA (Stable)
16/02/2004
Fitch Ratings
AAA (Stable)28/06/2019

Sources: Moody's, Standard & Poor's, Fitch Ratings

10.2 Competitiveness and Efficiency Indicators


World Ranking
201720182019
Ease of Doing Business Index
9/19010/19012/190
Ease of Paying Taxes Index
28/19027/19027/190
Logistics Performance Index
N/A2/160N/A
Corruption Perception Index
6/1803/180N/A
IMD World Competitiveness9/639/639/63

Sources: World Bank, IMD, Transparency International

10.3 Fitch Solutions Risk Indices


World Ranking
201720182019
Economic Risk Index RankN/A3/2022/202
Short-Term Economic Risk Score
75.875.8
76.0
Long-Term Economic Risk Score78.579.6
81.4
Political Risk Index RankN/A2/2022/202
Short-Term Political Risk Score
86.5
86.584.8
Long-Term Political Risk Score93.793.793.8
Operational Risk Index RankN/A6/2015/201
Operational Risk Score76.579.2

78.0

Source: Fitch Solutions
Date last reviewed: July 17, 2019

10.4 Fitch Solutions Risk Summary

ECONOMIC RISK
Economic growth is set to slow somewhat over 2019 on weakening domestic demand and the risk of a significant slowdown in the pace of growth of the global economy. Specifically, lower housing prices will deter fixed investment and prompt consumers to become more frugal with their spending. That said, a tight labour market is expected to result in above-inflation wage growth this year, which should support consumer spending in the near term. The surge in migrant inflows in 2015-16 will lead to higher economic growth over the medium term, but will present challenges to the fiscal accounts, the labour market, and domestic political stability.

OPERATIONAL RISK
Sweden boasts an attractive operating environment for businesses, offering foreign businesses a low degree of security risks, competitive access to utilities and transport, and an enabling trade and investment environment bolstered by a strong legal and bureaucratic framework. Sweden’s labour market, however, presents some downside risks, as the average cost of employment in Sweden among the highest third globally.

Source: Fitch Solutions
Date last reviewed: July 31, 2019

10.5 Fitch Solutions Political and Economic Risk Indices

Graph: Sweden short term political risk index
Graph: Sweden short term political risk index
Graph: Sweden long term political risk index
Graph: Sweden long term political risk index
Graph: Sweden short term economic risk index
Graph: Sweden short term economic risk index
Graph: Sweden long term economic risk index
Graph: Sweden long term economic risk index

100 = Lowest risk; 0 = Highest risk
Source: Fitch Solutions Economic and Political Risk Indices
Date last reviewed: July 17, 2019

10.6 Fitch Solutions Operational Risk Index


Operational RiskLabour Market RiskTrade and Investment RiskLogistics RiskCrime and Security Risk
Sweden Score78.067.7
78.187.5
78.6
Developed States Average72.464.671.376.377.4
Developed States Position (out of 27)3113315
Global Average49.650.349.849.049.2
Global Position (out of 201)5156318

100 = Lowest risk; 0 = Highest risk
Source: Fitch Solutions Operational Risk Index

Graph: Sweden vs global and regional averages
Graph: Sweden vs global and regional averages
Country
Operational Risk Index
Labour Market Risk Index
Trade and Investment Risk IndexLogistics Risk IndexCrime and Security Risk Index
Denmark80.4
74.8
76.2
88.382.3
Netherlands78.465.9
78.2
88.680.7
Sweden78.067.7
78.187.578.6
Switzerland77.775.077.675.183.2
New Zealand77.473.775.772.188.3
United States77.281.3
75.382.969.3
Canada77.074.375.476.781.6
United Kingdom76.871.479.078.578.2
Norway76.264.072.280.887.9
Finland74.255.874.183.483.7
Ireland73.966.878.072.079.0
Austria73.760.871.980.581.5
Luxembourg72.854.277.680.079.3
Germany72.365.569.081.273.6
Australia72.067.872.168.379.9
Japan71.872.465.577.971.5
France71.860.171.183.272.8
Iceland71.460.667.269.688.1
Belgium71.358.272.883.271.1
Spain71.359.469.880.976.0
Liechtenstein70.759.878.161.583.2
Portugal69.451.766.580.978.4
Israel67.471.464.671.162.7
Isle of Man65.869.162.449.382.4
Malta64.654.969.060.873.7
Italy
63.754.559.776.264.3
Greece58.054.249.268.959.6
Developed Markets Averages72.464.671.376.377.4
Emerging Markets Averages46.948.645.447.4
46.1
Global Markets Averages49.650.349.849.049.2

100 = Lowest risk; 0 = Highest risk
Source: Fitch Solutions Operational Risk Index
Date last reviewed: July 17, 2019

11. Hong Kong Connection

11.1 Hong Kong’s Trade with Sweden

Graph: Major export commodities to Sweden (2018)
Graph: Major export commodities to Sweden (2018)
Graph: Major import commodities from Sweden (2018)
Graph: Major import commodities from Sweden (2018)

Note: Graph shows the main Hong Kong exports to/imports from Sweden (by consignment)
Date last reviewed: July 17, 2019

Graph: Merchandise exports to Sweden
Graph: Merchandise exports to Sweden
Graph: Merchandise imports from Sweden
Graph: Merchandise imports from Sweden

Note: Graph shows Hong Kong exports to/imports from Sweden (by consignment)
Exchange Rate HK$/US$, average
7.75 (2014)
7.75 (2015)
7.76 (2016)
7.79 (2017)
7.83 (2018)
Sources: Hong Kong Census and Statistics Department, Fitch Solutions
Date last reviewed: July 17, 2019


2018
Growth rate (%)
Number of Swedish residents visiting Hong Kong59,390
-6.8

Source: Hong Kong Tourism Board


2018
Growth rate (%)
Number of European residents visiting Hong Kong1,961,450
1.7
 2017Growth rate (%)
Number of developed state citizens residing in Hong Kong65,6801.6

Source: United Nations Department of Economic and Social Affairs – Population Division
Date last reviewed: July 17, 2019

11.2 Commercial Presence in Hong Kong


2018
Growth rate (%)
Number of Swedish companies in Hong Kong95
5.6
- Regional headquarters29
7.4
- Regional offices30
3.4
- Local offices39N/A


11.3 Treaties and agreements Between Hong Kong/Mainland China and Sweden

Sweden has a double tax agreement with Mainland China. The agreement was signed in 1986, coming into force in 1987.

Source: Chinatax.gov

11.4 Chamber of Commerce or Related Organisations

Swedish Chamber of Commerce in Hong Kong
Address: Room 2503, 25/F, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong
Email: chamber@swedcham.com.hk
Tel: (852) 2525 0349

Source: Swedcham

Hong Kong Chamber of Commerce in Sweden
Email: kansli@hongkong.se
Tel: (46) 70 577 5975
Website: www.hongkong.se
Please click to view more information.

Source: Federation of Hong Kong Business Associations Worldwide

Consulate General of Sweden
Address: Room 2501, 25/F, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong
Email: generalkonsulat.hongkong@gov.se
Tel: (852) 2521 1212
Fax: (852) 2596 0308

Source: Embassy of Sweden

11.5 Visa Requirements for Hong Kong Residents

Hong Kong residents can travel to the Schengen Zone without a visa. They can travel for tourism and business purposes and remain in the region for a period of up to 90 days.

Source: Embassy of Sweden
Date last reviewed: July 17, 2019

Content provided by Picture: Fitch Solutions – BMI Research
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