OECD Economic Outlook, Volume 2026 Issue 1

Switzerland

Real GDP is projected to grow by 1.1% in 2026 and 1.5% in 2027. Domestic demand will remain the main driver of growth as higher energy prices and the uncertain external environment weigh on foreign demand, while Switzerland is less dependent on oil and gas. Uncertainty will restrain exports. These effects should dissipate after 2026 as global demand strengthens. Inflation will pick-up slightly but remain low, due to the economy’s low energy-intensity. New trade tariffs could reduce growth prospects.

Monetary policy will remain accommodative, limiting the effects from a strong currency. The fiscal stance will remain neutral. Expenditure reductions are expected for 2027, to ensure compliance with the federal debt-brake rule. Periodic spending reviews, integrated into the budget process, could help to ensure that cuts do not undermine growth. Increasing healthcare spending efficiency would help to reduce long-term spending pressures. Strengthening ties with trading partners would improve economic resilience.

Real GDP growth remains below potential

Based on preliminary results, real GDP unadjusted for sporting events grew by 1.3% in 2025, below its annual average of 1.8% over the last decade. Consumer surveys and business sentiment indicators point to further growth momentum in the first quarter of 2026. In April, consumer price inflation, which hovered around zero in 2025, increased to 0.6% year-on-year, reflecting higher international energy prices due to the evolving conflict in the Middle East. The increase in energy prices was partly offset by the strong Swiss franc, which has been trading at historical highs.

Switzerland

1. All variables are seasonally and calendar adjusted, and at constant values.

Source: CEIC; SECO; and OECD Economic Outlook 119 database.

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Switzerland: Demand, output and prices

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Switzerland’s reliance on imports from the Middle East and the weight of energy in the consumer price index basket is among the lowest in the OECD, due to low energy-intensity, which limits the economy’s direct exposure to trade disruptions. Most exports to the United States are now facing a 10% tariff rate, similar to that faced by competitors, with bilateral negotiations about a more permanent trade agreement still ongoing.

Monetary policy remains supportive with fiscal policy remaining broadly neutral

As a response to the rapid appreciation of the Swiss franc, partly driven by safe-haven considerations, and to prevent consumer prices from falling below the 0-2% price stability range, the central bank has kept the policy rate unchanged at 0% since June 2025. The rate is expected to remain unchanged until the outlook improves from late 2026. Higher energy prices are countering disinflationary pressures from the currency appreciation. Additional policy rate cuts, which would make the rate negative, do not seem necessary at this point. Supportive monetary policy is welcome with fiscal policy expected to remain broadly neutral to ensure compliance with the federal debt-brake rule. Assuming that the fiscal savings and VAT tax increase proposed by the federal government will be approved, the fiscal balance is set to improve slightly. Support measures to cushion the impact of higher energy prices are not expected.

The economic outlook is clouded by uncertainty

Real GDP unadjusted for sporting events is projected to grow by 1.1% in 2026 and 1.5% in 2027. High trade-related and geopolitical uncertainty are expected to continue affecting export growth and hampering investment. Growth will be sustained by domestic private consumption as households benefit from low inflation and favourable financing conditions. The outlook will improve in 2027 as key trading partners recover from the energy supply shock and exports rebound. Headline inflation is projected to increase in the short term due to higher energy prices but remain within the 0-2% range consistent with price stability. Risks are tilted to the downside as the energy supply shock and disruptions to global supply chains could last longer than expected and new trade tariffs cannot be ruled out, including on pharmaceuticals. A faster recovery in European and other trading partners could strengthen growth further.

Ambitious reforms are needed to contain long-term spending pressures

Broad-based and discretionary cuts to public spending would support fiscal consolidation but run the risk of affecting effective and growth-enhancing programmes. Systematic and regular spending reviews, linked to the annual budget process, would be one way to avoid this risk and help maintain an already low public spending in international comparison without damaging growth. There is scope to increase healthcare spending efficiency by further encouraging managed-care models and reducing over-servicing through strict gatekeeping. This would also help to contain mounting long-term spending pressures. Long-term public debt sustainability will, nonetheless, require more ambitious pension reforms. Stabilising ties with key trading partners and enhancing productivity-spillovers from export-oriented and larger firms to smaller domestic-oriented ones would increase the resilience to shocks and improve growth prospects.