Switzerland has experienced strong and stable growth in recent years. However, productivity growth has been below the OECD average due to low levels of female labor participation and a lack of competition in some sectors. Housing prices and household debt have increased substantially, exposing the economy. The OECD recommends increasing competition, boosting female labor participation, and implementing macroprudential policies and supply-side reforms to improve productivity and ensure stable long-term growth.

1. www.oecd.org/eco/surveys/economic-survey-switzerland.htm
OECD
OECD Economics
2015 OECD ECONOMIC
SURVEY OF SWITZERLAND
Catherine L. Mann
OECD Chief Economist
Bern, 1 December 2015

2. Switzerland has enjoyed strong
and stable growth
2
Real GDP levels in selected countries
Index, 2008 Q1 = 100
Source: OECD Economic Outlook 97 database (and updates).

3. The exchange rate is strong
3
Source: Swiss National Bank.
Exchange rates
Enforced currency ceiling of 1.2 euros to the franc from 6 September 2011 to
15 January 2015

4. Extremely loose monetary policy
4
1. The SNB implements its monetary policy by fixing a target range for the three-month Swiss franc Libor. The Libor is a
reference interest rate in the interbank market for unsecured loans. It is a trimmed mean of the rates charged by 11 leading
banks and is published daily by the International Commodities Exchange (ICE).
Source: Swiss National Bank, Monthly Statistical Bulletin and Monthly Bulletin of Banking Statistics, April 2015; and OECD
Economic Outlook 97 database.
.

5. Popular initiative limiting immigration to be
implemented by 2017
5
-1.0
-0.5
0.0
0.5
1.0
1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Natural Increase Net migration Population
Migration and natural population growth
Per cent growth
Source: OECD Population and Vital Statistics database.

6. Per capita GDP levels are high
6
Difference in level of per capita real GDP compared to upper half of OECD
Percentage points
Compared to the simple average of the 17 OECD countries with highest GDP per capita in 2013 based on 2013
purchasing power parities (PPPs)
Source: OECD, Going for Growth 2015.
-80
-60
-40
-20
0
20
40
60
-60
-40
-20
0
20
40
60
HUN
POL
EST
GRC
SVK
PRT
SVN
CZE
ESP
ITA
JPN
EU
OECD
GBR
FRA
FIN
BEL
CAN
DEU
DNK
SWE
AUT
IRL
NLD
USA
CHE
LUX
2
3

7. Labour productivity growth has been around
the OECD average
7
Labour productivity and real GDP per capita growth, 2005-14
Average annual percentage change
Source: OECD, Economic Outlook 97 database (and updates); OECD National Accounts database; and SECO.

8. Total Factor Productivity growth has been
below par
8
Average annual TFP growth, 1995-2013
Average annual percentage change
Source: OECD Productivity Database.
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
ITA ESP DNK NZL BEL NLD CHE CAN JPN AUT FRA AUS DEU GBR SWE USA FIN IRL KOR

9. Real wages have decoupled from
productivity growth
9
Real wages and labour productivity growth
Index, 2008-Q1=100
1. Deflated by Producer Price Index.
2. Productivity measured using hours worked.
Source: OECD, Economic Outlook 97 database (and updates).

10. Recommendations for improving productivity
growth and boosting medium-term growth
Key recommendations
• Increase competition in the telecoms and energy sectors, including
privatising Swisscom.
• Push forward with reforms in the agricultural sector.
• Extend the network of free-trade agreements, including with India and the
United States.
• Take measures to promote more intensive participation of women in the work
force, such as by increasing the supply of childcare facilities and introducing
individual as opposed to family taxation.
Other recommendations
• Move to a single VAT rate with as few exemptions as possible.
• Streamline insolvency procedures to facilitate more efficient business
adjustment to structural change.
10

11. The housing sector
11

12. House prices have increased considerably
12
1. Nominal house prices divided by per capita nominal disposable income.
2. Nominal rent prices divided by per capita nominal disposable income.
Source: OECD House Price database.

13. Household debt has increased
13
Source: OECD Economic Outlook 97 database (and updates) and national sources.
0
50
100
150
200
250
300
350
0
50
100
150
200
250
300
350
SVK
HUN
SVN
POL
CZE
ITA
EST
AUT
DEU
BEL
GRC
FRA
USA
FIN
JPN
ESP
PRT
GBR
KOR
CAN
SWE
AUS
CHE
NOR
IRL
NLD
DNK
2000 2007 2013 or latest
Household debt in OECD countries
% of disposable income

14. Supply-side responsiveness is low
14
0.0
0.5
1.0
1.5
2.0
2.5
CHE
NLD
AUT
ITA
BEL
FRA
ISR
GBR
DEU
POL
ESP
NOR
AUS
IRL
NZL
FIN
JPN
CAN
DNK
SWE
USA
A. Price elasticity of new housing supply¹
CHE
NLD
AUT
ITABEL
FRA
GBR
DEU
POLESP NORAUS
IRL
NZL
FIN JPN
CAN DNK
SWE
USA
ISR
0.0
0.5
1.0
1.5
2.0
2.5
0 50 100 150 200 250
Number of days to obtain a building permit ²
Supply responsiveness ¹
B. Price elasticity of supply and land-use
regulations
Housing supply responsiveness in selected countries
1. Estimates of the long-run price elasticity of new housing supply where new supply is measured by residential investment
(see Caldera Sánchez and Johansson (2011)).
2. The number of days to obtain a building permit is obtained from the World Bank Doing Business (2009) indicators.
Source: Caldera Sánchez, A. and Å. Johansson (2013), “The price responsiveness of housing supply in OECD countries”,
Journal of Housing Economics, Volume 22, Issue 3, September, pp. 231-49.

15. Exposure to housing sector is high
15
1.Or latest available observation. 2014 annual average for Switzerland.
Source: IMF, Financial Soundness Indicators (FSI); OECD Economic Outlook 97 database (and updates); and OECD
calculations.
Stock of residential loans relative to total bank loans and GDP
0
5
10
15
20
25
30
35
40
45
50
NOR
CHE
SWE
DNK
ESP
NLD
DEU
ITA
BEL
2009 2010 2011 2012 2013 2014
A. Stock of mortgages to total bank loans (%)
0
20
40
60
80
100
120
140
MEX
TUR
USA
POL
KOR
ITA
ISR
DEU
AUT
GRC
FIN
LUX
IRL
ESP
SVK
BEL
CAN
NLD
GBR
PRT
SWE
NOR
DNK
AUS
CHE
B. Stock of mortgages to GDP, 2015-Q2¹ (%)

16. Macro-prudential policies aimed at curtailing
the housing boom
16
July
2012
10% equity excluding
2nd pillar
Amortise to LTV 2/3s
within 20 years
Legal framework for
CCB
August
2012
SNB abstained from
activating CCB
January
2013
10% equity excluding
2nd pillar
February
2013
CCB activated at 1%
January
2014
CCB increased to 2%
September
2014
Amortise to LTV of
2/3s in 15 years
October
2011
Revision of SBA
guidelines –
affordability,
valuation
standards, etc. 2nd Revision of SBA
guidelines – second
incomes and valuation
principles.
Common Bank Internal Policies
LTV ratio of 80%; Interest to Income of 1/3; Reference interest rate of 5% + 1% + 1%.

17. Housing policy and related
recommendations
17
• Establish a framework for explicitly addressing affordability risk, to be used if
needed to contain financial stability risks related to imbalances in the housing
and mortgage markets.
• Monitor closely mortgage lending to firms or households for rental properties,
which may not be as responsive as the owner-occupied segment to recent
regulatory measures.
• Review spatial planning regulations to make it easier to build denser housing.
• Harmonise cantonal and communal land-use and building codes to promote
greater competition and economies of scale in the construction industry.
• Impose an extra tax on land in high-demand areas that has been rezoned for
real estate but has remained undeveloped for more than five years.
• Limit the tax deductibility of mortgage interest so that, combined with
maintenance outlays, it does not exceed the amount of declared imputed rent.
Update the imputed rent calculations more frequently to better reflect market
values.

18. The efficiency of public spending
18

19. The size of government is small
19
Government spending and employment
Source: OECD, Economic Outlook No. 97 database (and updates).

20. But early childhood enrolment rates are low
20
Enrolment rates in early childhood and primary education at the age of three
Source : OECD, Education at a Glance 2014 database.

21. Health expenditure projections
21
Decomposition of health expenditure developments and projections
2000 = 100, per cent of GDP
Source: Federal Statistical Office (BFS); and Federal Health Office (BAG), KOF.

22. Pension expenditure is set to balloon
22
Public finance projections
Debt-to-GDP ratio, baseline scenario
Source: Swiss Federal Department of Finance, 2012 Report on the Long-Term Sustainability of Public Finances
in Switzerland, Bern.
0
20
40
60
80
100
120
140
2009 2012 2015 2018 2021 2024 2027 2030 2033 2036 2039 2042 2045 2048 2051 2054 2057 2060
Confederation Social security Cantons Communes

23. Recommendations to improve public
spending efficiency
23
• Increase public spending on early childhood education and care, especially for
children with disadvantaged socio-economic backgrounds (including those
from immigrant backgrounds), which could be combined with a generalisation
of the childcare voucher systems in the Canton of Lucerne.
• Boost the supply and attractiveness of fields of study that are in high demand
in the labour market. Further clarify study streams across the tertiary
education system.
• Switch the system for setting generic drug prices to reimbursing a pre-
determined fixed amount.
• Encourage systematic benchmarking of hospital costs. If rates keep rising
despite the recent reforms, consider new legislation to control them using cost
benchmarks.
• Fix the retirement age at 65 for both sexes and thereafter link it to life
expectancy. To cut early retirement, reduce existing incentives and pay a larger
pension premium for those who choose to work longer.

24. More Information…
www.oecd.org/eco/surveys/economic-survey-switzerland.htm
OECD
OECD Economics
Disclaimers:
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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.
24