Expand / Collapse Hide / Show all Abstracts Table of Contents

• Mark
• • PDF
  • READ
  Assessment and Recommendations

  Although trend growth of GDP has been meagre for two decades (1¼ per cent against 2¾ per cent for the OECD average), per capita income in Switzerland remains among the highest in the OECD. In recent years, output growth was less resilient than in most other OECD countries, with the economy being in recession during the first semester of 2003. This is partly due to the global slump in the financial and capital goods sectors which are very important for the Swiss economy, but the unsatisfactory growth performance is largely attributable to the timid pace of structural reforms over many years. Against this background, there are three major challenges for economic policy...

• • PDF
  • READ
  Macroeconomic Developments and Main Policy Challenges

  Switzerland was in recession during the first semester of 2003, having been hit harder than the majority of the other OECD countries by the sluggishness of international activity since 2000-01, despite a rebound of activity in the third quarter of 2003. This is partly due to the nature of the downturn, which has strongly affected sectors that are particularly important to the Swiss economy. However, these poor results also reflect the negative trend growth differential that has existed for some time vis-à-vis other countries. Against this background, the most immediate challenge for the authorities is to create conditions that will support the recovery as foreign trade picks up. This chapter reviews recent developments in the Swiss economy and also, more generally, highlights the reasons for the poor medium-term growth performance. It goes on to assess the role of fiscal and monetary policies in the present phase of the cycle, and also their room for manœuvre and effectiveness should deflationary pressures fail to abate. Finally, the chapter reviews the main challenges that low trend growth poses for the economy...

• • PDF
  • READ
  Medium and Long-term Fiscal Policy Challenges

  Looking beyond the short term, one of the important tasks for economic policy is to keep the public finances on a sound footing, which could provechallenging if growth should remain weak over the medium term. Fiscal management faces three major challenges. The first relates to the implementation of federal fiscal policy. Because of the difficulties encountered in implementing the new debt containment rule in 2003, the government has had to adjust its financial plan to restore its accounts to structural equilibrium in the medium term. A number of lessons should be drawn from the initial application of the debt containment rule in order to improve this new budgetary framework. The second challenge concerns the reform of the pension system. Adjustments are still needed to ensure the long-term financial viability of the basic old-age and invalidity pension systems, while the financial market slump also necessitates reforms of the (second pillar) occupational benefit plans which are funded schemes. Third, the public sector must pursue its efforts to improve efficiency. These will pay off not just for general government, whose financial resources will probably not grow fast in the medium term, but also for the private sector which should benefit from improved services...

• • PDF
  • READ
  Product Market Competition and Economic Performance

  As highlighted in Chapter I, the relatively poor performance of the Swiss economy over the past 20 years has mainly structural roots, with cyclical factors and negative shocks playing a lesser role. Human resources are well used and highly qualified, thanks to a flexible labour market and a good education system, which explains to a large extent the high living standard. However, several markets have not functioned well and the competition framework has not provided conditions conducive to greater dynamism. This has resulted in sluggish productivity growth which largely explains the lacklustre performance of the Swiss economy. While there is a long-standing tradition of maintaining a business-friendly climate, this often translates into a mild attitude towards anti-competitive behaviour. Since the early 1990s, reforms have aimed to improve the competition framework, although the range of problems addressed is sometimes narrow, the pace of reform is slow and initiatives are often taken in reaction to developments in neighbouring countries. Moreover, reform attempts have sometimes been blocked by popular vote, perhaps because the large potential benefits of liberalisation and their compatibility with legitimate security concerns are not well understood and need to be better explained. This chapter will highlight the potential gains from reforms, pointing to key areas where efforts would be most beneficial...

• • PDF
  • READ
  Other Structural Reforms to Maintain High Living Standards

  It was argued in Chapter I that the low trend growth of GDP is to a large extent rooted in structural factors. Many of these relate to a lack of competition in product markets, which was analysed in Chapter III. This chapter looks at other areas where performance has traditionally been considered good, but where further improvements can be achieved in order to raise the speed limits of the economy. In the labour market, there is room for raising participation, which would also help in facing the challenges of an ageing population. Education policy must pursue quality improvements without increasing the already high costs. Finally, the financial system, which has been one of the engines of growth in recent years, needs to adapt swiftly to the recent financial markets slump. This chapter looks at these issues in turn, with a final section devoted to three areas of sustainable development, i.e. climate change, water policy and waste management. A synopsis of recommendations, including those concerning the public sector issues discussed in Chapter II, is provided in Table 21...

• • PDF
  • READ
  Annexes
• Add to Marked List