In its most recent economic survey of Switzerland, the OECD indicates that the crisis has reinforced the need to reduce barriers to competition and trade.
Switzerland has proven to be highly resilient in the face of the COVID-19 crisis thanks to the diversification of its economy with relatively little reliance on the accommodation and leisure sector and with significant fiscal room for maneuver to support households and businesses.
According to a new OECD report, reviving productivity growth and revitalizing the labor market are essential to support the recovery and maintain high living standards.
In its most recent economic survey of Switzerland, the OECD indicates that the crisis has reinforced the need to reduce barriers to competition and trade, develop the skills of the workforce, strengthen the pension system and improve labor market participation by to help seniors, women and low-skilled workers find a job and by reducing the gender gap in working time. Switzerland’s labor productivity is among the highest of any OECD country, but labor productivity growth, which is essential to counteract the impact of aging on GDP per capita, has slowed sharply over the past three decades.
“Once again, the Swiss economy has shown strong resilience in the face of a global crisis. It is on the road to recovery, but the pandemic continues to create challenges and uncertainties for Switzerland, as it does for all countries in the world,” said OECD Secretary-General Mathias Cormann, presenting the research at a virtual event. together with the Swiss Federal Councilor. Guy Parmelin. “For a strong and sustainable recovery, it is important to increase labor market participation and support the momentum of agreements that can boost competition, trade and investment.”
Swiss GDP contracted by just 2.5% in 2020 (a less pronounced contraction than in most other economies) and was back to pre-crisis levels by mid-2021. According to the survey, growth is expected to be 3.0% in 2022. Inflation has risen but remains subdued, and Switzerland’s fiscal position remains solid, with a government debt-to-GDP ratio of 47% in 2021. Given the steady increase in property prices, close monitoring of risks will be needed to support financial stability.
As a small open economy, Switzerland is sensitive to changes in the international context, in particular to disruptions in trade and supply chains. As the Omicron variant diminishes the prospect of a quick way out of the pandemic, Switzerland must continue to ramp up its vaccination campaign, with a focus on elderly and at-risk citizens. According to the study, state aid measures should continue to target sectors and workers that still face restrictions.
It is essential to reduce the barriers to competition in the internal and international market, such as the need to ensure regulatory and competition neutrality of public enterprises in order to open competition between cantons. Certain sectors, notably agriculture and certain service sectors, are protected from international competition. Switzerland is called upon in this study to remove these barriers and strengthen its partnership with the EU to maintain access to its market. It could also improve the business environment by cutting red tape for start-ups and making it easier for companies to enter and exit the market.
In particular, in order to improve the activity rate, it is necessary to remove the factors that prevent older people from staying in work and mothers from working longer, in particular by increasing the offer of childcare services for children at affordable costs and to enhance job searches for seniors. Above the age of 65, the high employment rate that characterizes Switzerland falls sharply. Setting the statutory retirement age at 65 for both men and women, and linking it to longer life expectancy and improving incentives to work after this age, are two measures that would ease spending pressures and increase growth as the population grows. aging would help support. The high proportion of women working part-time (45% against an average of 25% in OECD countries) could be reduced, in particular by increasing childcare to reduce costs and by revising taxes and benefits in the system, financial barriers to work for second earners.
Finally, the survey points out that Switzerland has managed to decouple its economic growth from its national greenhouse gas emissions and its domestic material consumption, but that it will need to take other measures to reach the target of reducing its net greenhouse gas emissions to zero. by 2050, in particular reassess certain carbon tax exemptions. It is also possible to ensure a better match between investment portfolios and climate objectives and to promote eco-innovation.
Click here to access a summary of this economic study with key conclusions and key graphs.