OECD Economic Outlook, Volume 2025 Issue 1

Switzerland

Real GDP is projected to grow by 1.1% in 2025, and 1.2% in 2026. Private consumption will benefit from rising real wages and employment, while investment will continue its recovery. Export growth will lose momentum amid slower global growth and higher US trade tariffs. Moderate demand pressures will keep inflation within the central bank’s target range.

The monetary policy stance will continue to be supportive of growth in 2025-2026. The same holds for fiscal policy as the small headline fiscal surplus expected in 2025 will narrow in 2026, although gross public debt will decrease slightly relative to GDP. Expanding the government one-stop-shop would help increase investment. Relaxing foreign equity restrictions would help to attract more foreign direct investment. Reaching climate neutrality requires further reforms to facilitate investments in renewable energy.

Growth has picked up and inflation has slowed

GDP grew by 0.5% in the fourth quarter of 2024, compared to the previous quarter and adjusted for sporting events. Growth was driven mostly by manufacturing, especially chemicals and pharmaceuticals, and the services sector. Domestic demand remained solid, driven by consumption and investment. Indicators for economic activity grew in early 2025, but surveys suggest that businesses remain cautious about the outlook in the coming months in several industries, including manufacturing. Labour shortages are easing, and recruitment intentions have improved. CPI inflation slowed from 0.6% year-over-year in December to 0.0% in April 2025, and one-year-ahead inflation expectations declined slightly but remain in line with the central bank definition of price stability.

Switzerland

1. Year-on-year growth rates. The sum of components may deviate from observed GDP growth because of balancing items, chain-linking procedures and direct/indirect seasonal adjustment methods.

2. Year-on-year growth rates.

Source: OECD Economic Outlook 117 database; and Federal Statistical Office.

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Switzerland: Demand, output and prices

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The United States was the destination of 19% of Swiss goods exports in 2024, excluding precious metals. Exports included mostly chemicals and pharmaceutical products. US trade tariffs on imports of pharmaceuticals remain unchanged, but a special probe on these imports is ongoing and could lead to higher specific tariffs being applied. Steel and aluminium exports to the United States face a 25% import tariff, while other goods exports are subject to a 10% import tariff.

Monetary and fiscal policies will be supportive of growth

The central bank is expected to continue lowering the policy rate, reaching 0% by mid-2025, amid increased trade tensions and uncertainty about the growth outlook. The real interest rate is therefore expected to become negative in the coming quarters, providing support to economic activity. The general government will post a headline surplus of 0.6% of GDP in 2025, which will narrow to 0.1% of GDP in 2026 due to higher pension spending following last year’s reform. Fiscal policy at the federal level will continue to comply with the debt brake rule, which requires a balanced structural budget. Government debt as a share of GDP will decrease over 2025-2026.

Growth is projected to slow

Real GDP will grow by 1.1% in 2025 and 1.2% in 2026, supported mostly by domestic demand. Growing real wages and employment will help to sustain private consumption growth. Export growth will be damped by slower global growth and higher US tariffs on Swiss exports, only partly compensated by higher investment in Germany. Inflation will increase over 2025-2026, but contained demand pressures will keep it well within the target range of 0-2%. Risks are tilted to the downside. A further escalation of global trade tensions could lead to capital inflows and an appreciation of the Swiss franc, as investors seek safe havens, which could weaken export growth even further. Slower implementation of planned investments in Germany could also weigh on exports.

Streamlining regulatory processes would help boosting investment

Further reductions in administrative burdens on firms could help to support investment, for example by expanding the government one-stop-shop to incorporate cantonal services. Relaxing foreign equity restrictions could attract more inward foreign direct investment. Reaching climate neutrality hinges on increasing electrification, which will require extensive investment in low-carbon energy sources. Speeding up planning and authorisation procedures for building renewable power plants would support this process. Improving the congested power grid will require streamlining licensing procedures and reducing approval times for transmission line and distribution network projects.