The Swedish forestry sector's net export is four times greater compared to the manufacturing industry
The forestry industry is often billed as being a major contributor to the Swedish economy, regions and municipalities - but it is not always so easy to understand why this is the case, and what different terms used mean. So, we’ve asked national economist and author, Klas Eklund, to explain the forestry sector’s contribution to the economy.
It’s easy to say that the forest is important for the Swedish economy. It’s harder to explain how and what it is needed to build a sustainable Swedish economy for the future. We asked national economist Klas Eklund, author of best-selling economics textbook, Our Economy: An Introduction to Economics, to explain. In addition to being an author, Eklund has a background from Sweden’s Ministry of Finance, the Cabinet Committee, Chief Economist at the bank SEB and senior positions on Sweden’s Riksbank Council, the Third AP Pension Fund and ESO, an expert group on public finance. Eklund is currently Senior Economist at law firm Mannheimer Swartling.
The value of Swedish forestry exports amounts to SEK 167 billion and the value of net exports amounted to a surplus of SEK 123 billion in 2021. What does this mean in concrete terms for Sweden?
“The surplus means that the national economy earns a lot of money - for those who work in the sector and for the Swedish economy as a whole. The surplus is due to the fact that the outside world is willing to pay a lot for Swedish forestry products, while at the same time the industry does not need to import so much from abroad. The income of the forest, pulp and paper industry goes to employees in the form of wages and business investment. When those funds are used, for consumption and for the purchase of machinery and more, the forestry industry indirectly provides purchasing power to other sectors.
“Exports have risen rapidly since the pandemic, and the forest has thereby contributed considerably to the recovery of the Swedish economy. Major advances in technology and product development are also striking. I remember when I studied economics a long time ago. At the time, it was often said that Sweden’s old “base industries” were outdated and should be phased out. But the opposite has been true – forest industries have modernised and have become increasingly important”
Is there any added value in exports compared to domestic sales?
“The important thing is not really trade balance or net exports, but that our resources are used productively. Nevertheless, a positive trade balance contributes to keeping the external debt down and makes us less vulnerable to economic shocks.
“The forest industry is unique in that way. Net exports, i.e., exports minus imports within the sector, are almost four times larger than Sweden’s entire manufacturing sector’s net exports - despite the fact that the manufacturing industry is significantly larger. The reason is that the forest industry has good access to domestic raw materials and processes the raw materials itself.”
What economic function do you think the forestry industry has for sparsely populated areas?
“It’s clear that forestry industries are extremely important for sparsely populated areas. The forest is an area-based industry that needs a lot of space – it's in sparsely populated areas by its very nature. So, it’s in these areas where jobs are created in forestry and in businesses that process forestry products. The forest will continue to be important – it can’t be moved. Forestry also indirectly creates jobs in other sectors because it generates so much added value.”
How can Sweden and the EU move forward to replace fossil-based raw materials with bio-raw materials in the production of, for example, energy, fuel for heavy transport and aviation fuel?
“This is another example of how the forest and its industries can address various challenges with new technologies. Bio-raw material in fuel is already widely used for land transport in Sweden. If this can be extended to aviation, it would be an important contribution to slowing climate change. This is where technical development is needed, which in turn requires significant investment in research and factories. It would be a considerable advantage if the EU could agree on the importance of bio-raw materials in climate policy. Currently, however, many differences remain between different countries.”
What would the economic impact of such a development for forest countries such as Sweden?
“Of course, the Swedish public finances would benefit from greater use of bio-raw materials. We could export even more, and contribute to a better climate.”