High labour costs and slower corporateinvestment could hinder Sweden's economic growth after 1987,
the Organisation for Economic Cooperation and Development,
OECD, said.
    The Swedish economy grew at a slower rate in 1986 than in
previous years. GDP rose about 1.7 pct in 1986 compared with
2.2 pct in 1985. But this growth depended largely on external
factors, particularly lower oil prices, the OECD secretariat
said in its latest annual report on Sweden.
    It warned that labour costs had risen more rapidly in
Sweden than in other OECD countries.
    Because of high labour costs Swedish industry, which
largely relies upon export markets, was losing market share.
Wages in the manufacturing sector grew by seven pct in 1986, in
line with 1985 increases, while public sector wages rose an
estimated 9.2 pct in 1986, up from six pct in 1985.
    This was significantly higher than average wage increases
of 3.75 pct for the seven largest members of the OECD in 1986.
    The report said wage moderation was central to maintaining
economic growth in Sweden. It suggested that wage negotiations
should be at least partly centralised to control the total
wages bill and hold down inflation and unemployment levels.
    Helped by low oil prices and the government's tight fiscal
policy, inflation fell to just over three pct in 1986 from
almost six pct in 1985 but remained higher than in most other
OECD countries, the report said.
    Unemployment, a principal policy target, was at 2.7 pct in
1986, in line with 1985's 2.8 pct and well below the OECD
average of 8.6 pct. The report said Sweden's employment
policies accounted for the high levels of wage inflation.
    It also said that economic growth in 1986 relied
increasingly on private consumption because corporate
investment in machinery and equipment had shrunk.
    The total volume of industrial investments dropped by two
pct in 1986, with sharp declines in spending by the wood, pulp
and paper industries. This compared to a 19 pct rise in 1985
when there was heavy investment in these industries.
    The OECD said Sweden should now make an effort to boost
corporate investments and reduce its dependence on domestic
consumption for economic growth. It suggested there was room
for reform in the tax system.
    Sweden should continue to cut public sector spending,
especially in local government, to keep in line with its
tighter fiscal policy, the report said.
 REUTER
