New OECD report gives Swiss economy a glowing review for 2024

A new report from the Organisation for Economic Cooperation and Development (OECD) has given the Swiss economy top marks for its resilience against and handling of previous crises. However, the organisation warned that while the economy is expected to remain strong in 2024, Switzerland faces a multitude of challenges moving forward and must interact more with the world if it is to maintain its prosperity.

Swiss economy given high praise by OECD

In the report, the OECD noted that “Switzerland has shown remarkable strength during the COVID-19 pandemic and the recent turmoil in energy markets following Russia’s war of aggression against Ukraine.” They noted that the combination of a diverse economy, a strong Swiss franc and a highly skilled workforce had helped keep unemployment and inflation levels low and living standards high compared to other countries around the world.

Like previous forecasts, the OECD predicted that Swiss GDP will grow by around 0,9 percent in 2024, before expanding by 1,4 percent in 2025. In terms of fiscal policy, the country still has more wiggle room than other nations, with the Swiss debt-to-GDP ratio standing at 37 percent at the end of 2023. 

They predicted that annual inflation, which sank to 1,2 percent at the end of February 2024, is still expected to rise back up to 2 percent by the end of the year, because of “rent and electricity price increases as well as changes to value-added tax rates.” Inflation is then forecast to drop again by the end of 2025.

Switzerland to face major domestic and international challenges

However, it wasn’t all sunshine and rainbows, with OECD experts noting that the Swiss economy continues to face major challenges. Domestically, the report predicted that “population ageing and the green transition” will place a lot of pressure on the government to either raise taxes and / or cut spending in the future. Indeed, a 2023 report from the Swiss government predicted that, as things stand, a quarter of the population will be retired by 2030.

To counter the large number of people expected to retire, the OECD recommended that Switzerland “increase the labour market participation of women, older workers and immigrants.” Other measures, such as scrapping joint tax filing for married couples, reducing the cost of childcare services and allowing non-EU graduates of Swiss universities to easily apply for regular residence permits were all suggested to ease the worker shortage and burden on the pension system.

Globally, the OECD noted that Switzerland faces an increasing rise in geopolitical tensions and protectionism, leading to an unstable and unpredictable global economy. While experts praised the alpine nation for maintaining open trade principles, it called for a bigger push from the government to establish more free trade deals with other countries, and for Switzerland to conclude a new framework agreement with the EU.

Switzerland already on track to meet OECD recommendations, say government

Writing in response, the Federal Council noted that the government is already taking important steps to make the OECD recommendations a reality. On the global stage, “These include, in particular, the adoption of the negotiating mandate with the EU, the recently signed free trade agreement with India and the recently completed modernisation of the free trade agreement with Chile.”

However, whether parliament will follow through on the domestic measures proposed by the OECD, remains to be seen. For more information, check out the official report.