The Swedish economy loses about €8 billion ($10.4 billion) annually, or 2.8 percent of GDP, due to lost productivity and spending on healthcare and social services, the OECD found in a study entitled Mental Health and Work: Sweden.
The report also found that 60 percent of all new disability benefits claims stem from mental health problems, which is the leading cause of labour market exclusion among working-age people in Sweden.
"Disability benefit claims among youth for mental ill-health have almost quadrupled since the early 2000s, by far the largest increase across OECD countries for which data is available," the organization of developed countries wrote in a statement.
"With youth unemployment over 20 percent in Sweden, working with vulnerable young people is critical in order to break the vicious cycle of weak labour-market attachment and poor mental health."
Measures suggested by the OECD to address the issue include increased spending on school health services as well as a reform of Sweden's disability benefits programmes to put more emphasis on getting 19- to 29-year-olds back into the labour force.
Sweden should also boost support for employers to help them retain workers with mental health problems and look at better integrating its health and employment services, the group said.
Writing about the findings in an opinion article published on Tuesday in the Svenska Dagbladet (SvD) newspaper, Ulf Kristersson, Moderate minister for social insurance, explained that the financial costs of mental health are only part of the problem.
"Adding in the immeasurable human costs, we stand before one of biggest welfare challenges of our time," he wrote.