OECD: Sluggish economic activity slowing growth in Switzerland
Weak external demand, an erosion of purchasing power due to inflation, and tighter financial conditions have weighed on growth, the OECD said.
Keystone / Anthony Anex
Sluggish economic activity is weighing on growth, with Swiss gross domestic product (GDP) set to increase by 1.1% in 2024, the Organisation for Economic Co-operation and Development (OECD) said on Thursday.
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Weak external demand, an erosion of households’ purchasing power due to inflation, and tighter financial conditions have dragged down growth, the OECD said in a report.
The organisation expects inflation to rise temporarily towards the end of 2024, due to increases in rents and electricity prices, but the rate will remain within the 0%-2% target range set by the Swiss National Bank (SNB).
The unemployment rate will rise slightly to 4.4% and is expected to remain unchanged in 2025, the OECD predicted.
The economic outlook is made more uncertain by risks such as a disruption to overseas supply chains, which could push up prices again and dampen economic activity. The high level of household debt and possibility of a readjustment in housing prices also pose risks to the financial sector, the OECD said.
Monetary policy is likely to remain restrictive. The SNB’s main key rate was cut from 1.75% to 1.5% in March and is set to remain at this level until the second half of 2024.
In its report, the OECD also stated that structural reforms were needed to maintain living standards in Switzerland, with the ecological transition, defence requirements and demographic ageing increasing budgetary pressures.
To counter rising costs, the organisation recommended bringing the retirement age into line with life expectancy. In addition, to alleviate the shortage of skilled labour, it mentioned increasing the activity rate among mothers and senior citizens in particular as well as immigration as possible solutions.
Adapted from German by DeepL/kp
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