Sweden's knowledge economy

Sweden tops many lists

The economy is constantly changing. Some industries are growing while others are disappearing. Like many other small and open economies, Sweden has extensive trade relations with the rest of the world, accelerating structural change. Sweden's role in the global value chain is increasingly as a provider of knowledge, which characterises the business sector in particular.

Highly qualified industries account for nearly half of Sweden's GDP, significantly outpacing the EU average. The Swedish labour market reflects this trend, boasting probably the highest concentration of high-skilled jobs in the EU, according to Eurostat. Another survey from Eurostat shows that tasks in Swedish workplaces are relatively advanced.¹

For the past few decades, Sweden has regularly topped the EU’s lists of R&D relative to GDP. To put this into perspective, Sweden spends 30% more on R&D than on investments in new energy production. Recently, the UN presented a list of innovative countries. Out of 133 countries, Sweden was ranked second.

1. See NIER’s Wage Formation Report, October 2024.

Services – the Swedish export miracle

A key indicator of the expanding knowledge economy is significant growth in foreign trade in services. In Q3 2024, exports of services were 40% higher than before the pandemic. Services currently account for 18% of GDP versus 7% at the turn of the millennium. Imports of services have grown even faster – by as much as 47% compared to before the pandemic. Imports of services are larger than exports, and the gap has widened in recent years. In net terms, services have thus dampened GDP growth.

Sharp increase in foreign trade in services

Index 2019=100

Although the net figure is negative, the production of services in Sweden is important. A parallel can be drawn to goods.  Sweden imports more cars than it produces. However, the domestic production of cars is still important for GDP and the labour market. 

Recent years’ developments underline the growing globalisation of foreign trade in services. However, it seems to have stagnated for goods; probably because international specialisation is already highly developed for goods but also due to increased tariffs.

The increase in exports of services is broad-based and knowledge-intensive. Some of the leading industries are services related to head offices, R&D as well as information and telecommunications.

Job growth among highly-skilled workers

Sweden has transitioned well to the knowledge-based economy. Since 2005, employment has increased by almost 1 million people. The number of workers relative to the population is high in a historical perspective and compared to other countries. Employment growth has only accelerated among those with a higher education, whereas it has decreased for those who are less educated. 

Competitiveness

The economic impact of globalisation is significant. It affects, for example, GDP growth, the labour market, capital formation and thus economic policy. The changes are taking place continuously in most developed countries, but Sweden has come a relatively long way when it comes to the transition to qualified and knowledge-intensive activities. One weakness is that a few large companies dominate R&D investments and that quite a large part of foreign trade in services takes place within conglomerates. However, at present, the business sector appears to be competitive, contributing to relatively bright growth prospects for the Swedish economy.

This article first appeared in the Nordea Economic Outlook: Consumer comeback, published on 22 January 2025. Read more from the latest Nordea Economic Outlook.