Presentation of the Economic Survey of Switzerland 2019

OECD ECONOMIC SURVEY OF SWITZERLAND 2019 Preparing for ageing and digitalisation Bern, 4 November 2019 http://www.oecd.org/eco/surveys/economic-survey-switzerland.htm

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Average incomes are high GDP per capita, current prices, 2018 USD, PPP

Source: OECD, National Accounts database.

Living standards are high Better Life Index, country rankings from 1 (best) to 36 (worst)

Source: OECD, OECD Better Life Index, www.oecdbetterlifeindex.org.

Growth has slowed Headline GDP growth, year-on-year

%

Note: Headline GDP includes the impact of some international sports events.

Source: OECD, OECD Economic Outlook database.

Investment has been contracting Contribution to GDP growth from gross fixed capital formation, year-on-year

%pts

Source: OECD, OECD Economic Outlook database.

Inflation is low % y-o-y

Source: OECD, OECD Monthly Economic Indicators database; Federal Statistical Office.

Monetary policy is very accommodative %

Source: Refinitiv.

Policy rates

Housing prices and credit continue rising

Source: OECD, Analytical House Price Indicators database; Swiss National Bank.

Public debt is low % of GDP

Gross general government debt

Source: OECD, OECD Economic Outlook database.

Federal fiscal surpluses have been larger than intended % of GDP

Difference in outcomes from budget

Source: Federal Finance Administration; OECD calculations.

Key policy recommendations • Take advantage of available fiscal space as needed, including by making fuller use of the margins under the spending limits of the fiscal framework (or “debt-brake rule”) • When inflation is firmly rising start to remove monetary accommodation • Establish a formal framework for setting mortgage lending limits that takes affordability into account and is enforced on a comply-or-explain basis

PREPARING FOR FASTER POPULATION AGEING

Population ageing will intensify %

Population share aged 65 or over

Source: OECD, OECD Economics Department Long-term Model.

Ageing-related public spending will rise Change in expenditure from 2019 to 2060 % pts of potential GDP

Note: These scenarios are illustrative only and differ from national projections.

Source: OECD, OECD Economics Department Long-term Model.

Retirement will be relatively long Expected duration of retirement for a male born in 1996 Years

Source: OECD, Pensions at a Glance 2017: OECD and G20 Indicators; United Nations (2019), World Population Prospects: The 2019 Revision, Online Edition.

Pension replacement rates will likely fall Replacement rate at retirement from mandatory schemes1 Per cent of individual earnings for an average earner retiring around 2061

1. This calculation is based on current policies, including the conversion rate (for annuities) which is above an actuarially fair rate. It does not include extra-mandatory schemes, to which most employees contribute.

Source: OECD, Pensions at a Glance 2017: OECD and G20 indicators; OECD (2019), “Will future pensioners work for longer and retire on less?�, Policy Brief on Pensions.

Key recommendations to prepare the pension system for ageing • Fix the retirement age at 65 for both sexes as planned, then raise it gradually to 67 and thereafter link it to life expectancy • Lower the parameter used to calculate annuities or update the parameter used (“minimum conversion rate”) and make it a more flexible technical parameter set by ordinance

High labour force participation drops sharply after retirement age Labour force participation rate, by age group %

Source: OECD, Labour Force Statistics database.

Early retirement is receding but remains common Early retirement, in % of population, by years before legal retirement

Source: Federal Statistical Office.

Older jobseekers have more difficulty finding work Long-term unemployment as a share of total unemployment by age group, 2018 %

Source: Eurostat, Labour Force Statistics.

The tax mix relies heavily on income taxation Tax revenue, % of GDP

Source: OECD, Revenue Statistics database.

Tax revenue, % of total

Key recommendations to lengthen working lives • Use the existing annual conference on older workers to find ways to introduce greater flexibility into the wage-setting system and reduce seniority wages • Flatten the age-related progressivity in pension contribution rates • Prohibit age discrimination and establish enforcement mechanisms • Allow workers to compensate for gaps in their pension rights through contributions after age 65 • Reduce personal income taxation (at all levels of government) by lowering tax rates at low incomes and removing the disincentive for second-earners, financed by greater use of value-added tax, recurrent tax on immovable property and environmental taxes

The Swiss health care system is high quality but costly USD PPP

Health spending per capita by financing source, 2018 or latest

Source: OECD, Health Statistics database.

The use of generics is still low Share of the total pharmaceuticals market, 2017 or latest1

1. Including medical non-durables.

2. Reimbursed pharmaceutical market.

3. Community pharmaceutical market.

Source: OECD, Health Statistics database.

Long-term care needs drive higher costs at older ages Annual health care costs per capita, 2016

Source: Federal Statistical Office.

Long-term care is mostly homebased but varies across cantons Recipients as a share of the population aged 65 years or over, 2017 %

Source: Federal Statistical Office.

Key recommendations to cope with rising demand for health care and long-term care • Proceed with cost containment programmes, particularly for curative care and pharmaceuticals • Introduce financial incentives and penalties to encourage the take-up of electronic patient health dossiers by health professionals and the input of quality data • Use innovative tools such as vouchers or individual budgets based on a level of care needs, with co-ordinators helping to navigate the system, to develop the system in a cost-effective way

EMBRACING DIGITALISATION AND NEW TECHNOLOGIES

Switzerland leads in infrastructure but use of some technologies is average Take-up of technologies by firms

Source: OECD, ICT Access and Usage by Business database.

Swiss adults’ digital skills lag the top performers Share of the population with more than basic digital skills, 2017 %

Source: Eurostat, Digital Skills database.

Participation in adult learning is high but can be broadened Participation by educational attainment, % of population aged 25-64, 2018

Source: Eurostat, Education and Training database.

There is scope to ease entry and strengthen competition

More stringent

Product market regulation indicators From 0 (best practice) to 6 (most stringent), 2018

Barriers to domestic & foreign entry Source: OECD, Product Market Regulation Indicators database.

Distortions induced by state involvement

Digital government can be further improved Index

Open-Useful-Reusable government data index, 2017

Source: OECD, Measuring the Digital Transformation, OECD Publishing, Paris.

The transport sector contributes to greenhouse gas emissions Sources of greenhouse gas emissions from energy

% %

Source: OECD, Environment database.

GDP is less carbon-intensive than elsewhere but progress has stalled Demand-based CO2 intensity of GDP

Source: OECD, Green Growth Indicators database.

Key policy recommendations •

Facilitate high-skilled immigration from non-EU countries to meet current labour market needs

•

Reduce barriers to entry, including by removing restrictions on the number of competitors and simplifying occupational licensing across cantons

•

Expand spending on training for jobseekers, including those on social benefits

•

Use subsidies to encourage continuing education and training for groups who are most at risk from the effects of digitalisation

•

Expand the use of digital tools to enhance services and simplify procedures at all levels of government

•

Implement the OECD Going Digital roadmap for measuring the digital transformation, with a priority on more timely and internationally comparable data

•

Redesign the federal vehicle tax to strengthen price incentives to purchase low-emission vehicles

•

Strengthen disclosure of climate-related risks by financial intermediaries in line with recommendations of the Task Force on Climate-related Financial Disclosures

For more information

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