OECD ECONOMIC SURVEY OF SWITZERLAND
20 January 2022, Bern and Paris
Towards a strong and sustainable recovery www.oecd.org/economy/switzerland-economic-snapshot/ @OECDeconomy
@OECD
Key messages Fiscal and monetary policy should remain supportive but increasingly focus on facilitating resource reallocation. Reduce barriers to competition in the internal market and lower administrative burden on start-ups. Maintain stability in international agreements and openness to trade and investment. Improve the environmental sustainability of consumption and investment as well as ensure consistent pricing of environmental externalities. Raise labour-market participation of mothers and older people. Reduce inequities in education.
2
The economy is set to recover but some sectors and groups were hard hit
3
The COVID-19 pandemic continues Daily COVID-19 new cases Per million inhabitants, 7-day moving average 2 700
Daily COVID-19 deaths Per million inhabitants, 7-day moving average
2 400
OECD
2 100
14
Switzerland OECD
Switzerland
12 10
1 800 1 500
8
1 200
6
900
4
600
2
300 0
Feb 20
Jul 20
Dec 20
May 21
Oct 21
Feb 20
Jul 20
Dec 20
May 21
Oct 21
0
Source: OECD calculations based on Our World in Data. 4
The Swiss economy has been resilient
Real GDP, index 2019 Q4 = 100 110
110 Switzerland
105
105 OECD
100
100
95
95
90
90
85
2019 Q4
2020 Q2
2020 Q4
2021 Q2
2021 Q4
2022 Q2
2022 Q4
2023 Q2
2023 Q4
85
Source: OECD Economic Outlook database. 5
The authorities have extended generous fiscal support The number of unemployed and short-time workers Thousand
Government deficit % of GDP 4
1200
Short time workers
2
Unemployed, ILO 0
800 600 400
-2
2022
2020
2018
2016
2014
2012
2010
2008
2006
2004
2002
200 2000
-4
1000
2015 2016 2017 2018 2019 2020 2021
0
Source: OECD Economic Outlook database; SECO; FSO 6
The fiscal position remains strong
Public debt is low 160
160
Gross financial liabilities
140
140
Net financial liabilities
120
120
100
100
OECD
80
80
60
60
40
40
Switzerland
20
20
0 -20
0 2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
-20
Source: OECD Economic Outlook database. 7
Monetary policy remains expansionary The SNB has intervened in the foreign exchange market
Policy interest rates % 2.5
Switzerland Euro area Sweden Denmark
2.0 1.5 1.0 0.5 0.0 -0.5 -1.0
2010
2012
2014
2016
2018
2020
% of imports 275 Foreign currency reserves 225
2010 = 100 145 135
Nominal effective exchange rate (right scale)
175
125
125
115
75
105
25
95
2010
2012
2014
2016
2018
2020
Source: Refinitiv; OECD Economic Outlook; SNB. 8
Vulnerabilities in the housing market have not abated
House prices
Banks’ mortgage claims
2015 = 100 120
Households
110
Y-o-y % change 9
Non-financial corporations
8 7
100
6
90
4
5
80 70
2010
2012
House price to income ratio
3
House price to rent ratio
2
2014
2016
2018
2020
2010
2012
2014
2016
2018
2020
1
Source: OECD, Analytical House Price Indicators database; SNB. 9
Accommodation and food service activities have been particularly hard hit Real gross value added Index 2019 Q4 = 100, seasonally and calendar adjusted
120 110 100 90 80 70 60 50 40 30 20
Chemicals and pharmaceuticals Construction Accommodation and food service activities
Employment Index 2019 Q4 = 100, full time equivalent Other manufacturing Trade, repair of motor vehicles and motorcycles Other business sector services
105 100 95 90 85
2019 Q4
2020 Q2
2020 Q4
2021 Q2
2019 Q4
2020 Q2
2020 Q4
2021 Q2
80
Source: SECO; FSO. 10
The crisis has hit low-income households more Change in income and spending October 2020 compared to normal situation, % 0
0
-5
-5
-10
-10
-15
-15
-20
-20
-25
Income Less than 4 000
4 000 to 6 000
6 000 to 10 000 Household income, CHF
10 000 to 16 000
Spending Over 16 000
-25
Source: SRG/Sotomo, 2021. 11
Main policy recommendations to support the recovery and promote economic restructuring Monetary policy should remain accommodative until the recovery is firmly underway. Consider reactivating the countercyclical capital buffer targeted at residential mortgages and progress further on managing the risks from “too-big-to-fail” banks. Use the flexibility within the debt brake rule to avoid a too rapid tightening in fiscal policy. Continue to narrow policy support to hardest-hit sectors and vulnerable groups. 12
Once most pandemic restrictions are lifted, scale back the short-time working compensation scheme to prepandemic levels.
12
Boosting competition to raise productivity and growth
13
Labour productivity is one of the highest in the OECD…
GDP per capita USD, current prices, current PPPs, OECD = 100, 2019
COL MEX CRI CHL TUR GRC LVA SVK POL HUN PRT LTU EST SVN ISR ESP JPN KOR CZE NZL ITA OECD GBR FRA CAN FIN AUS BEL SWE DEU AUT NLD ISL DNK USA NOR CHE IRL LUX
200 180 160 140 120 100 80 60 40 20 0
MEX CRI CHL GRC HUN LVA KOR SVK POL TUR PRT EST NZL ISR JPN CZE LTU SVN CAN ESP OECD ITA AUS GBR FIN ISL DEU NLD SWE AUT USA FRA CHE BEL DNK NOR LUX IRL
GDP per hour worked USD, current prices, current PPPs, OECD = 100, 2019
260
200 180 160 140 120 100 80 60 40 20 0
Source: OECD Productivity database. 14
…but productivity growth has slowed
135
Labour productivity (real GDP per person employed) 1995 = 100 OECD
Switzerland
130
135 130
125
125
120
120
115
115
110
110
105
105
100
100
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
Source: OECD Productivity database. 15
Productivity improvements are needed to maintain high living standards Contribution to potential output per capita growth in % points Capital stock per worker Trend employment rate
Trend labour efficiency Potential output per capita growth
Trend working age population ratio Trend labour productivity growth
2.5
2.5
2.0
2.0
1.5
1.5
1.0
1.0
0.5
0.5
0.0
0.0
-0.5
2000
2003
2006
2009
2012
2015
2018
-0.5
Source: OECD Economic Outlook database. 16
Barriers in the internal market and state involvement reduce competition Product Market Regulation indicators From 0 (best practice) to 6 (most stringent), 2018 3.5
Switzerland
3
OECD average
Least stringent regulation (five lowest)
2.5
3 2.5
2
2
1.5
1.5
1
1
0.5 0
3.5
0.5 Overall PMR indicator
Public ownership State involvement in Simplification and Admin. burden on Barriers in service & Barriers to trade and business operations evaluation of start-ups network sectors investment regulations
0
Source: OECD 2018 PMR database. 17
0 Air transport
Broadcasting
Courier
Legal
Accounting
Commercial banking
Motion pictures
Computer
Rail freight transport
Switzerland
Sound recording
Construction
Logistics customs… Logistics freight forwarding
Engineering
0.4
Logistics cargo-handling Road freight transport Logistics storage…
Architecture
Insurance
Telecom
Distribution
Agriculture and some services sectors are protected from global competition Services trade restrictiveness index (STRI) From 0 to 1 (most restrictive), 2020
0.5 0.5
OECD 0.4
0.3 0.3
0.2 0.2
0.1 0.1
0
Source: OECD STRI Regulatory database. 18
Main policy recommendations to boost competition and raise productivity Fully implement the Internal Market Act to ensure equal access to markets in all cantons. Harmonise the merger control framework with that of the EU and strengthen the civil law on cartels. Reduce the administrative burden on start-ups. Introduce “Silence is consent” licensing rules. Expand the government one-stop shop (EasyGov.swiss) by integrating cantonal governments’ services. Lower restrictions on trade in both goods and services, notably in agriculture. Remove the barriers to FDI where applicable and keep them low. 19
19
Using resources effectively to raise sustainability
20
Emissions are low and energy efficiency is high CO2 intensity CO2 per unit of GDP 0.4
Energy intensity Energy supply per unit of GDP
kg/USD (2015 PPP) OECD
ktoe/USD (2015 PPP) Demand
0.3 0.2 Switzerland
0.08
Demand
0.1
2005
2010
2015
0.04
Switzerland
Production
2000
0.12
OECD
Production
0
0.16
2020
2000
2005
2010
2015
2020
0
Source: OECD Environment Statistics (database). 21
Domestic emissions and material use have been decoupled from growth Decoupling 2000 = 100 160 140
Domestic material consumption
Total primary energy supply
GHG emissions
Real GDP
160 140
120
120
100
100
80
2000
2005
2010
2015
2020
80
Source: OECD Environment Statistics (database). 22
Environmental pressures remain with high material footprint Use of material resources 2019 or latest available year 35 30 25
35 Switzerland
30
OECD
25
20
20
15
15
10
10
5
5
0
Domestic material consumption (tonne/capita)
Material productivity (USD(2015 PPP)/kg)
Material footprint (tonne/capita)
0
Source: OECD Environment Statistics (database). 23
Municipal waste is high Municipal waste treatment 2019 or latest available kg/capita 800 700
Recycling and composting
600 Landfill
500 400
Incineration
300 200
Total municipal waste in 2000
100 0
Switzerland
OECD
Source: OECD Environment Statistics (database). 24
Main policy recommendations to boost effective use of resources
Prepare a federal waste prevention strategy including indicative targets for municipal waste reduction. Continue efforts to broaden the base of the carbon tax by reassessing exemptions and align pricing of CO2 emissions with international climate cost benchmarks. Continue increasing transparency in relation to climate compatibility of financial portfolios. Strengthen the disclosure of climate-related risks for large companies and the financial sector. 25
25
Raising labour market inclusion
26
Rapid population ageing creates pressures Population by age group millions 12 10 8
0-14 years
15-24 years
25-49 years
50-64 years
65-79 years
80+ years
6 4 2 0
1960
1970
1980
1990
2000
2010
2020
2030
2040
2050
2060
27
Note: In Panel A youth are shown in green, 25-64 year-olds in blue and seniors in orange. After 2020 data are from the “medium variant” of UN scenarios. Source: United Nations (2019), World Population Prospects: The 2019 Revision, Online Edition.
27
Uptake of work by older workers is low Employment rate % of respective population, 2020 100
Switzerland
100
OECD countries
80
80
60
60
40
40
20
20
0
Men
Women 55 to 59
Men
Women 60 to 64
Men
Women 65 to 69
28
0
Source: OECD Employment and Labour Market Statistics database 28
Once unemployed, older workers can have difficulties in finding a job Incidence of long-term unemployment (1 year and over) by age group, % 50
50 2019
40
2020
40
30
30
20
20
10 0
29
30-34
35-39
40-44
45-49
50-54
55-59
60 and over 55 and over
10 0
Source: OECD calculations based on SECO. 29
Female labour force participation is high but many women work part-time Labour force participation rate Women, aged 15-64, 2020
60 50 40 30 20 10 HUN SVK LTU CZE POL LVA PRT SVN EST GRC TUR SWE FIN LUX FRA KOR ESP ISR ISL DNK CHL OECD CAN COL MEX BEL NOR NZL ITA IRL AUT GBR DEU AUS JPN CHE NLD
30
TUR MEX CHL ITA CRI COL KOR GRC POL OECD BEL HUN IRL SVK FRA ISR USA ESP LUX CZE PRT SVN AUT JPN AUS CAN GBR LVA DEU NOR DNK NZL FIN EST NLD LTU CHE SWE ISL
90 80 70 60 50 40 30 20 10 0
Incidence of part time employment Women, 2019 and latest available year
Note: Part-time employment is based on a common 30-usual-hour cut-off in the main job. Source: OECD Labour Force Statistics database.
0
30
High cost of childcare discourages mothers to take up full-time work Net childcare costs for parents using childcare facilities Couple with 2 children earning the average wage, 2020 or latest available year % of net household income 30
30
25
25
20
20
15
15
10
10
5
5 ITA DEU AUT KOR SWE TUR ISL PRT ESP EST LVA NOR HUN POL GRC LUX DNK LTU ISR JPN SVN OECD CAN FRA BEL FIN CZE USA NLD AUS SVK GBR IRL NZL CHE
0
31
0
Source: OECD Social Expenditure Database, http://www.oecd.org/social/expenditure.htm; OECD Family database, http://www.oecd.org/social/family/database.htm.
31
Taxes and a reduction in benefits when taking up work act as a disincentive Participation Tax Rate (PTR) for parents claiming Unemployment Benefits and using childcare services¹ Couple with 2 children earning the average wage, 2020 or latest available year, % 150 125 100
Contribution of childcare benefits
Contribution of other benefits
Contribution of childcare fees
Overall indicator
150
Contribution of taxes
125 100
75
75
50
50
25
25
0
0
-25 32
KOR ESP EST ISR TUR NOR ITA JPN GRC LVA HUN PRT POL DEU NLD USA FRA OECD CZE ISL DNK FIN SVK SWE GBR SVN AUS IRL NZL LTU AUT CHE BEL CAN LUX
-50
-25
1. This indicator measures the financial disincentives to participate in the labour market. It calculates the proportion of earnings in the new job that are lost to either higher taxes or lower benefit entitlements when a jobless person takes up employment and claims unemployment benefits. Higher values means higher financial disincentives. Source: OECD Social Expenditure Database, http://www.oecd.org/social/expenditure.htm; OECD Family database, http://www.oecd.org/social/family/database.htm.
-50
32
There is room to reduce inequities in education Children enrolled in early childhood education and care services 3 to 5-year-olds, %, 2018
140 120 100 80 60 40 20 EST LVA CAN NOR IRL ITA KOR DNK GBR SVN GRC NLD SWE OECD POL AUT USA CHE CZE BEL DEU ISR LUX
33
TUR CHE USA SVK FIN POL CZE LUX OECD NLD AUT SVN JPN LVA ITA SWE DEU KOR NOR ESP BEL DNK FRA IRL ISR GBR
100 90 80 70 60 50 40 30 20 10 0
Gap in reading performance between advantaged and disadvantaged groups Score difference, 2018
0
Note: A socio-economically advantaged (disadvantaged) student is a student in the top (bottom) quarter of ESCS (PISA index of economic, social and cultural status) in his or her own country. Source: OECD, PISA 2018 Database, OECD (2020), "How do early childhood education systems differ around the world?", in Education at a Glance 2020: OECD Indicators. 33
Main policy recommendations to raise labour market participation and inclusion Fix the retirement age at 65 for both genders and link it to life expectancy. Keep expanding the supply of childcare and provide targeted measures to improve affordability. Reduce disincentives to work for second earners. Improve access to early childhood education and care for low-income households. 34
34
For more information Disclaimers: The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.
Follow us on twitter: www.oecd.org/economy/switzerland-economic-snapshot/ OECD Economics
OECD
35