Priscilla Fialho
OECD Economic Surveys: Switzerland 2026
Abstract
As a small, open and highly globalised economy, Switzerland has been highly exposed to global developments including swings in external demand, major changes in international trade policies and geopolitical uncertainty. The economy has weathered these shocks comparatively well, with continuously positive growth, low inflation, low unemployment and sound public finances. Growth will continue to be sustained by domestic private consumption amid low inflation and favourable financing conditions, while pressures in the labour market have diminished. Higher global energy and commodity prices in the context of the evolving conflict in the Middle East have affected Switzerland less than other countries, given the nature of its service-oriented economy with a comparatively low energy-intensity. A review of the banking regulation framework has led to several proposed amendments to bolster financial stability. While monetary policy has been supportive, fiscal policy has been broadly neutral, complying with fiscal rules. Implementing ambitious reform plans aimed at bolstering long-term fiscal sustainability will help to contain growing spending pressures, including from healthcare. Future growth will hinge on strengthening ties with trading partners and continuing to open up new potential markets.
1.1.1. Real GDP has been growing below potential
The Swiss economy has weathered recent shocks comparatively well, with continuously positive growth, low inflation, low unemployment and sound public finances. This has not least been thanks to its stable political environment and strong institutions (Box 1.1). As a small, open and highly globalised economy, however, Switzerland has been highly exposed to global developments including swings in external demand, major changes in international trade policies and geopolitical uncertainty. Therefore, while growth has been steady, it has remained below trend, falling short of the annual average growth rate of 1.8% that the country has enjoyed in the decade leading up to 2024 (SECO, 2026[1]).
Real GDP, not adjusted for sporting events, grew by 1.5% in 2024 and by 1.6% in 2025. Growth has been mostly driven by domestic demand as households enjoyed rising real wages and employment (Figure 1.1, Panel A). Exports also contributed positively to real GDP growth at the end of 2024 and early 2025, especially from the chemicals and pharmaceuticals sectors and to some extent driven by front-loading in anticipation of higher trade tariffs in the United States (Figure 1.1, Panel B). Export growth decelerated sharply in late 2025 following the introduction of a 39% additional tariff on most merchandise imports by the US from Switzerland in August 2025, which affected nearly 60% of merchandise exports to the US and 10% of total exports. In the first quarter of 2026, real GDP, not adjusted for sporting events, grew only 0.5% compared to the previous quarter, with a significant fall in exports of chemical and pharmaceutical products in the start of the year (SECO, 2026[2]). In the second quarter, real GDP growth, not adjusted for sporting events, grew 2.8% compared to the previous quarter, driven by a strong recovery of the pharmaceutical and chemical industry.
Real GDP, not adjusted for sporting events, is projected to grow by 2% in 2026 and by 1.4% in 2027 (Table 1.1). Growth will continue to be sustained by domestic private consumption amid low inflation and favourable financing conditions (Section 1.2.2). Higher global energy and commodity prices in the context of the evolving conflict in the Middle East have affected Switzerland less than other countries, given the nature of its service-oriented economy with a comparatively low energy-intensity (Chapter 3). The weight of energy prices in the consumer price index basket is among the lowest in the OECD, and Swiss imports from the Middle East represent less than 4% of total Swiss imports. A strong Swiss franc has also partly offset the increase in global energy prices and, more generally, limited imported inflation, bolstering domestic demand (see below and Section 1.2.1).
Higher global energy costs are, however, expected to weaken demand for Swiss goods and services from Switzerland’s main trading partners in 2026. The evolving conflict is also expected to lead to further upward pressure on the Swiss franc, driven by safe haven inflows. Exports will, however, benefit from reduced additional US tariffs, which were limited to 15% for most goods according to the joint declaration reached in November 2025 between the United States and Switzerland, and subsequently lowered further to 10% additional tariffs following the US Supreme Court ruling in February 2026.
Considerable uncertainty surrounding US trade policy and the complex external environment, including the evolving conflict in the Middle East, are expected to weigh on private investment in 2026 and 2027, exacerbated by low-capacity utilisation in manufacturing (SNB, 2026[3]). The recent announcement of additional duties of 12.5% under section 301 of the Trade Act of 1974 adds to the uncertainty. The outlook is nonetheless expected to improve in 2027 as key trading partners recover from the energy supply shock and exports rebound.
Source: OECD Economic Outlook database, OECD calculations based on UN Comtrade.
Federalism
Switzerland’s subnational jurisdictions, the cantons, enjoy a high degree of autonomy. The confederation only has authority in areas such as foreign policy, defence, civil and criminal law, nuclear and energy policy, social security and general principles for citizenship, zoning and environmental protection. All other tasks are under the cantons’ responsibility. To finance expenditure, the cantons can levy their own income and property taxes. Cantons also determine the scope of municipal autonomy.
Direct democracy
Swiss citizens aged 18 and over have the right to vote in national and local elections. Swiss citizens are also regularly called to vote on specific issues through referendums. Any change in the federal constitution requires a mandatory referendum. Since the constitution specifies maximum tax rates for the federal income tax and the value-added tax, for example, changes above these thresholds need to be approved by popular vote, by a majority of citizens and a majority of cantons. Moreover, citizens can launch popular initiatives to propose federal Constitutional changes and optional referendums to oppose new federal laws passed by Parliament. These only require a simple majority to be approved. Cantons draw on a similar toolbox of direct democratic instruments and can launch cantonal referendums on federal laws. Overall, the electorate are called approximately four times a year to vote on an average of fifteen issues.
Bicameral national assembly
Most public offices are semi-professional, including the Federal Assembly, and come with only minimal financial compensation. Most deputies have another job in addition to their parliamentary duties. They are financially independent from the public office they hold. Parliamentarians meet for three-week sessions four times a year, during what are known as sessions.
The semi-professional Federal Assembly has two chambers, the National Council and the Council of States. The National Council represents the people while the Council of States represents the cantons. All members are directly elected every four years by the people. The National Council is elected by proportional representation while for the Council of States, most cantons use a winner-takes-all voting system.
Consensus decision and the “magic formula”
The national government, called Federal Council, consist of seven members who have equal powers and are each in charge of a ministry. Members are elected by the Federal Assembly for a four-year term. The role of the president rotates annually among the government members and mainly entails representational duties. Decisions are made by consensus. The seven cabinet seats have been shared among the four main political parties according to their representation in parliament. Traditionally, a linguistic balance has also been respected. This tradition, called “magic formula”, has no legal status and has been used since 1959.
Source: Swiss federal authorities, Federal Department of Foreign Affairs (FDFA), Federal Finance Administration (FFA).
Annual percentage change, volume
Note: Major sporting events organised by international organisations, and occurring in even-numbered years, are included without any adjustment. (a) Current prices (billion CHF) 1. Contribution to changes in real GDP. 2. % of potential GDP. 3. % of household disposable income. 4. % of GDP. 5 stock measure of consolidated net financial liabilities at the end of the accounting period. Includes financial assets such as claims and the gold bullion component of monetary gold. Differs from the national accounts definition and the definition used by the IMF.
Source: OECD Economic Outlook database.
1.1.2. Pressures in the labour market have diminished
Following a period of a particularly tight labour market that saw the job vacancy rate reach its highest point in two decades in 2022 and then again in early 2023, the more moderate growth in 2024 and 2025 has left its mark on the labour market. Employment growth has been relatively subdued since 2024, resulting in a gradual rise in unemployment and a fall in the job vacancy rate (Figure 1.2, Panel A). Labour force surveys suggested lower difficulties in hiring skilled workers and subdued expectations from employers in 2025 (BFS, 2025[4]).
Despite labour market cooling, nominal and real wage growth remained positive and comparatively high at almost 2%, reflecting productivity growth in leading sectors of the economy (Figure 1.2, Panel B). With headline inflation close to 0%, household purchasing power has therefore continued to improve.
Moderate growth prospects ahead will be reflected in the labour market. Unemployment is expected to increase to 4.8% in 2026 -using the ILO definition- and then fall to 4.3% in 2027, above an historical average of 4% over 1990 to 2024 (Table 1.1). This will be underpinned by a moderate improvement in employment, as reflected in the KOF employment indicator in the last quarter of 2025 and the first half of 2026, that can be attributed to lower than originally expected tariffs on exports to the United States (KOF, 2026[5]). KOF labour force surveys also point to continuously positive real wage growth, although at more moderate levels than in previous years (KOF, 2026[6]). Should the evolving conflict in the Middle East last longer than expected and consumer prices rise above projections, real wage growth in 2026 and 2027 could be lower than anticipated.
Source: Eurostat, FSO.
The Swiss labour market is known for its remarkable stability, with employment among the top OECD performers and lower unemployment than peers (Figure 1.3, Panel A). Wages are among the highest in the OECD when measured in US dollars and adjusted for purchasing power parities (OECD, 2024[7]). One factor behind stable employment has been a short-time-work compensation scheme that has effectively limited job losses during times of crisis and acted as an automatic stabiliser (Figure 1.3, Panel B). Under this scheme, unemployment insurance covers a proportion of the salary costs of employers whose employees become temporarily redundant.
To cushion the impact of weaker external demand amid higher additional US tariffs and trade policy uncertainty, the maximum duration of the short-time-work compensation scheme was expanded from 12 to 18 months in 2024, and then to 24 months in 2025. The expansion in the maximum duration was due to expire in July 2026. However, in the context of the evolving conflict in the Middle East, the federal government decided to maintain the maximum duration at 24 months until the 31st of January 2027. Take-up has increased but remains modest so far compared to previous episodes of economic weakness. The scheme would probably be able to cushion the impact of slower exports growth on the labour market and household disposable income if the evolving conflict in the Middle East lasted longer than expected and global growth turned out weaker than anticipated, helping to sustain private domestic demand in 2026 and 2027. Measures to cushion the impact of high uncertainty and weaker external demand should nonetheless have clear sunset mechanisms allowing prompt withdrawal as the outlook improves.
Note: In Panel A, the unemployment rate is based on the internationally comparable definition of the International Labour Organisation (ILO).
Source: OECD Economic Outlook database, CEIC, SECO.
1.1.3. Inflationary pressures have been low
With headline inflation hovering around 0% for most of 2025, Switzerland has had consistently lower inflation than other OECD economies (Figure 1.4). Average annual consumer price inflation was 0.2% in 2025, down from 1.1% in 2024. This corresponds to the lower end of the central bank’s target range of 0-2% and can be attributed to lower energy and food prices in 2025, and lower prices for imported products due to the appreciation of the Swiss franc.
Amid geopolitical tensions and higher global energy prices, headline inflation increased from 0% year-on-year in November 2025 to 0.8% in August 2026, mostly driven by higher imported inflation, in particular petrol, diesel and heating oil, which fell from -1.3% to +1.5% over the same period. Domestic inflation also increased, but to a lower extent. Core inflation, excluding fresh and seasonal products, energy and fuels, reached 0.8% (FSO, 2026[8]).
Although inflation has risen slightly with the Middle East conflict, going forward, it is projected to increase only moderately from 0.2% in 2025 to 0.6% in 2026 and 2027, firmly remaining within the 0-2% range consistent with price stability. Based on OECD projections, the Swiss franc is expected to continue appreciating amid high global uncertainty, which will contain imported inflation, partially compensating the effects of higher international gas and oil prices.
Inflation expectations remain well-anchored and broadly stable in the medium term. Inflation expectations over the next 12 months ahead, based on the SECO consumer sentiment survey, increased significantly in March 2026, but expectations over the next five years remained largely unchanged. Inflation expectations for 2026 and 2027, as measured by UBS and the CFA Society Switzerland, based on investor sentiment surveys, also remain unchanged. The May survey of inflation projections by experts from banks and economic institutions conducted by Consensus Economics puts expected inflation at 0.6% year-on-year in May 2026 and at 0.7% in May 2027.
Source: OECD Economic Outlook database.
1.1.4. Risks to the outlook are tilted to the downside
Downside risks to the outlook have increased. The projections in Table 1.1 remain subject to considerable uncertainty regarding the duration of the war in the Middle East, the possibility that international oil and gas prices remain elevated for longer, and future developments in US trade policies. With respect to the latter, a focus will be on pharmaceuticals, where tariffs and pressure to lower export prices could dent the export receipts of the Swiss pharmaceutical industry. Investments pledged by the Swiss private sector, including Swiss pharmaceutical companies, in the US have helped secure a deal but could lead to reallocation effects, with potential negative consequences for Swiss output, investment and employment prospects. A further appreciation of the Swiss franc would weaken export growth even further. The Swiss National Bank could respond with negative policy rates, which could increase risks to financial stability if macroprudential measures, primarily the activation of the countercyclical capital buffer and tightening of LTV requirements, and if voluntary capital buffers and the accumulation of financial wealth among households are not sufficient. On the positive side, a possible easing of trade and geopolitical tensions, stronger gains from artificial intelligence and a faster economic recovery in European trade partners would raise growth projections above expectations. Besides these risks, there are also low-probability events that could lead to major changes in the outlook (Table 1.2).
1.2.1. Monetary policy should continue supporting the economy
Rapid nominal appreciation of the Swiss franc, partly driven by safe-haven flows, added to disinflationary pressures throughout most of 2025 and early 2026. To prevent consumer price inflation from falling below the lower band of the 0-2% price stability range, the Swiss National Bank (SNB) lowered its policy rate by 0.25 percentage points to 0% in June 2025. This brought the cumulative monetary easing to 175 basis points since March 2024 (Figure 1.5). The policy rate has remained unchanged at 0% since.
The current monetary policy stance is consistent with price stability, which is the SNB’s mandate, and supportive of growth. This appears adequate in light of elevated uncertainty regarding geopolitics and future trade policies and expected further upward pressure on the Swiss franc that will weigh on export competitiveness. As inflation expectations remain broadly stable and inflationary pressures are low (see above), the monetary stance should remain accommodative, supporting the economy until the recovery is well underway.
The SNB has been less active in foreign exchange markets during 2024 and 2025 than in previous years (Figure 1.6), but the SNB should continue to monitor exchange rate developments closely and may wish to smooth excessively rapid bouts of real appreciation if needed, with the objective of fulfilling the central bank’s mandate of ensuring price stability.
Note: Panel A: The deposit facility rate is used as the policy rate indicator for the euro area. Panel B: 1.
Constant trade weights. 2.Chain-Linked: Overall Weights. Movements in FX reserves also reflect valuation effects.
Source: OECD Economic Outlook database, SNB data portal, CEIC – OECD.
Recent improvements in the SNB’s communication strategy are welcome and in line with international trends. The SNB has launched new means of communication about its monetary policy in the autumn of 2025. For the first time, this included a public summary of its monetary policy discussions four weeks after the monetary policy decision, presenting the main points from the Governing Board’s discussions. The aim is to promote a better understanding of how the SNB applies its monetary strategy given the current economic context. This new means of communication strengthens transparency and credibility, allowing the public to better understand the central bank’s actions.
Foreign exchange transactions
Source: SNB data portal, OECD Economic Outlook database.
1.2.2. The financial system has been stable but gaps in banking supervision and regulation should be closed
Despite increased volatility on global markets since early 2025 amid trade policy uncertainty and geopolitical tensions, Swiss stock prices are now slightly higher than a year ago as the prospects for exports to the US have stabilised (Figure 1.7, Panel A). Global long-term interest rates have remained elevated and continue rising in some advanced economies, but Swiss long-term interest rates have decreased and are close to zero, pointing to particularly accommodative domestic financial conditions (Figure 1.7, Panel A). Against this background, credit volumes have continued to increase and are near historical averages (Figure 1.7, Panel B). The increase was mostly visible for household loans, which make up 64% of total bank lending, as well as for non-financial companies who account for 28% of total bank loans (SNB, 2025[9]).
The low-interest rate environment might contribute to an increase in risk-taking and the build-up of vulnerabilities in commercial and mortgage lending, and on the housing market. In fact, some indicators point to a deterioration in credit quality, albeit from high levels. Corporate bankruptcy rates have increased, but this was at least partly related to a change in legislation. Non-performing loans and credit losses have remained broadly unchanged. Risk appetite in residential mortgage lending remains elevated. Loan-to-income ratios continue to point to elevated affordability risks for new residential mortgage lending. At the same time, tax data point to strong household balance sheets.
Banking sector profitability, as measured by return on assets, has improved over the last year but shows large differences between domestically focused and globally active banks. Returns on assets of domestically focused banks, whose main source of income is net interest margins, decreased to 0.46% in 2024 and could come under additional pressure should interest rates remain at their current levels or decrease even further (SNB, 2025[9]). Global systemically important banks, by contrast, complement interest income with wealth management and investment banking fees and reported solid profits.
Note: In Panel A, Corporate bond yields refer to manufacturing and trade and Government bond yields refer confederation bonds.
Source: LSEG, SNB data portal, OECD Economic Outlook database.
The Swiss banking sector is large, with total assets close to 410% of GDP, but well capitalised in comparison to other advanced economies. In 2024, the Common Equity Tier 1 (CET1) risk-weighted capital ratio of the total banking sector reached 17.4%, and the CET1 leverage ratio 6.1%, well above regulatory requirements. Most banks also hold substantial high-quality liquid assets, in excess of the liquidity coverage ratio requirement. The take-over of the second-largest bank, Credit Suisse, by the largest one, UBS, in March 2023 required the merged bank to comply with higher capital requirements applicable as of 1 January 2030 given its size and domestic market share. UBS already meets these higher requirements (SNB, 2025[9]).
Stress tests by the Swiss National Bank suggest that available capital would suffice to absorb the economic impact of different adverse scenarios (SNB, 2025[9]). Stress losses could be significant for domestically focused banks, which are more exposed to interest rate risk and serve as key credit providers to households and companies, but SNB simulations suggest that they are sufficiently resilient (SNB, 2025[9]). Banks also hold substantial liquidity buffers, which contribute to their resilience. Nonetheless, close monitoring remains important.
Standalone capital ratios of a parent bank may overestimate its true resilience and hide vulnerabilities from foreign participations and subsidiaries. In the case of Credit Suisse, the parent company’s participations in foreign subsidiaries were not fully capitalised, preventing it from adequately covering losses from activities of these subsidiaries. This severely restricted the bank’s capacity to restructure itself and recover (EFD, 2024[10]).
The resilience of UBS is particularly important for Switzerland considering the bank’s size and systemic importance. UBS has become the world’s largest Global Systematically Important Bank (G-SIB) relative to the size of the home economy, with a leverage ratio exposure of about 150% of the Swiss GDP. In comparison, G-SIBs in the United Kingdom have a leverage ratio exposure of about 80% of the UK GDP (SNB, 2025[9]). UBS and the four domestically focused SIBs hold the bulk of customer retail deposits and account for about 60% of total bank assets.
The 2024 government review of the “Too Big To Fail” (TBTF) framework and the parliamentary investigation into the Credit Suisse failure led to several proposed amendments to bank regulation, as recommended in the previous OECD Economic Survey (Table 1.3). One of them would require G-SIBs’ parent banks to fully capitalise foreign participations with Common Equity Tier 1 (CET1) capital. This measure would be welcome as it would reduce fluctuations in the parent banks' equity caused by losses incurred by foreign subsidiaries and allow the parent bank to dispose of foreign subsidiaries either in part or in their entirety, without negatively impacting its standalone capitalisation and make bank resolution, which always remains the last resort, less likely (FINMA, 2025[11]). According to current estimates, if all announced measures were implemented, which is likely to happen over a period of 8 years, UBS's CET1 capital ratio would be only slightly above that of other internationally active big banks (EFD, 2025[12]). This proposal is currently discussed in parliament and could still be subjected to an optional referendum before it becomes law.
The Credit Suisse crisis also highlighted the risks of liquidity outflows when depositors lose confidence. The SNB is now working on the introduction of an Extended Liquidity Facility (ELF) that would facilitate access to limited liquidity volumes while maintaining more stringent requirements for larger volumes (SNB, 2025[13]). Complementing this with a public liquidity backstop (PLB) for SIBs, with the repayment of the liquidity support guaranteed by the government, could serve as an additional line of defence in case of a severe crisis (SNB, 2025[9]). Several countries have developed legal frameworks that allow for the use of a PLB as a policy tool during banking crises. A PLB proposal elaborated by the federal government contains several features to limit moral hazard and potential fiscal losses, including a risk-based annual fee and an additional provision fee, loan interest and risk premiums when the PLB is drawn upon, while dividends would be restricted during the procedure. Ensuring that these risk-mitigating features are not excessively weakened during the policy discussions of the PLB will be crucial to ensure an adequate burden sharing, especially as some researchers have pointed to significant implicit subsidies for banks that are “too big to fail” (Monnet, Niepelt and Taudien, 2025[14]).
Strengthening banking supervision and crisis prevention, and aligning with international best practice, could also include the introduction of a supervisory regime for senior managers, requiring banks to clearly assign and document individual tasks, duties, responsibilities, and powers for all senior managers. Such responsibility statements and maps would make it easier to hold banking executives accountable in cases of misconduct. In addition, the reform to strengthen banking supervision could also grant the supervisor FINMA more comprehensive early intervention powers. Current provisions suspend FINMA’s supervisory decisions automatically if institutions file appeals in court, in contrast to current practices in the European Union, the United Kingdom and the United States. A proposed reform would limit the automatic suspensive effect in case of legal recourse and allow FINMA to impose administrative monetary sanctions in cases of serious violations of financial market law. This would be welcome to close banking supervision gaps that became salient during the 2023 Credit Suisse.
1.2.3. Fiscal policy has been broadly neutral
Once corrected for the economic cycle, the primary balance is projected to fall from a surplus of 0.7% of GDP in 2025 to a 0.2% surplus in 2026 and a 0% balance in 2027 (Table 1.1). This implies a marginally supportive fiscal stance while ensuring compliance with the debt brake rule at the federal level. While revenues will remain largely unchanged, the lower primary surplus will be driven by a slight increase in spending on the armed forces from 0.71% to 0.78% of GDP and by the federal contribution to the financing of a recently approved 13th monthly pension payment in the public pay-as-you-go system, to be paid out for the first time in December 2026. Besides these discretionary spending increases, the government is relying on automatic stabilisers, such as the short-time work compensation scheme, the unemployment benefits programme, and the progressive tax system, to stabilise the economy. Switzerland has not introduced any energy support measures in response to higher oil and gas prices following the outbreak of the conflict in the Middle East. The country has also refrained from costly industrial policy initiatives, relying instead on its strong economic fundamentals, such as a highly skilled workforce and a bottom-up approach to innovation, to promote growth and competitiveness (Chapter 4). Only agricultural policy remains characterised by high levels of government support and market protection in international comparison (OECD, 2026[15]).
Federal expenditure is restricted by the debt brake rule and cannot exceed estimated cyclically adjusted revenues (Box 1.2). Subnational governments, who account for around 62% of total public expenditure, about 21% of GDP, without including social security contributions, well above the OECD average and the average of other federal countries in the OECD (OECD, 2025[16]), have also established their own debt brake or cantonal fiscal rules. Besides fiscal rules, most cantonal expenditures above a certain ceiling require popular approval, and voters can initiate a petition against major spending programmes. Tax competition between the cantons also ensures that public services are provided at a reasonable price according to residents’ preferences.
The federal debt brake rule was approved by popular vote in 2001 with an overwhelming majority of 84.7% and has since been enshrined in the Federal constitution. The rule specifies a one-year ahead ceiling on central government expenditures equal to predicted revenues adjusted by a factor reflecting the cyclical position of the economy. The cyclical factor is determined as the ratio of trend real GDP to expected real GDP. The rule therefore allows for counter-cyclical public spending, but over the economic cycle deficits and surpluses have to cancel out. Revenue and GDP forecasts are those used for the current budget planning. Trend GDP is calculated using the production function methodology applied by the European Commission. The rule includes investment spending.
The budget must be debt-brake compliant. Expenditures below and breaches of the spending limit in federal financial statements are recorded on a fictional account called the “compensation account”. The rule requires that any negative balance on this account must be eliminated over time. No time horizon is specified for the adjustment, allowing for some flexibility. If the negative balance exceeds 6% of expenditures though, the rule requires that the balance is brought to under 6% within three years. Positive balances, on the other end, can only be used to reduce debt.
The rule offers flexibility through an escape clause for unexpected situations and developments clearly defined in the law. Under exceptional circumstances the spending ceiling can be broken by a qualified majority in parliament. Such extraordinary expenditures are debited to another fictional account called “amortisation account” - which is different from the “compensation account” - and generally have to be offset during the following six years.
Source: (Danninger, 2018[17]).
Effective fiscal institutions, combined with a prudent spending strategy, have resulted in one of the lowest government expenditures relative to GDP in the OECD (Figure 1.8, Panel A). Federal and cantonal debt brake rules, in particular, have proven quite effective (Brandt et al., 2025[18]) (Brändle and Elsener, 2024[19]) (Bodmer, 2006[20]) (Burret and Feld, 2018[21]) (Feld and Kirchgässner, 2006[22]) (Burret and Feld, 2018[23]) (Salvi, Schaltegger and Schmid, 2020[24]). The general government has posted fiscal surpluses for the last ten years, except for 2020 and 2021, when extraordinary spending on health and social protection related to the COVID-19 pandemic led to a deficit (Figure 1.8, Panel B). As a result, general government debt has been well-below the OECD average and continued to fall (Figure 1.9).
Source: International Monetary Fund (2025) – with minor processing by Our World in Data, Federal Finance Administration, OECD Economic Outlook database.
General government
Source: OECD Economic Outlook database.
Compliance with the debt brake rule in the next few years will require some additional consolidation to finance the 13th pension month and additional defence spending, either through additional revenue sources or small expenditure cuts elsewhere.
On the revenue side, two separate proposals to increase the standard VAT rate are currently under consideration. The first one originally proposed a permanent increase by 0.7 percentage points which was later reduced to 0.4 percentage points, which would imply an increase in the standard rate from 8.1% to 8.5%, to finance additional pension spending on the 13th pension month, starting as early as 2028. If approved by popular vote (Box 1.6), the 0.4 percentage point increase would generate additional revenues of about 0.2% of GDP per year. However, this will not be sufficient to fully finance the 13th pension month. Additional funding will be required to cover pension payments in 2030. This would require raising the standard rate beyond what is currently considered, closer to the original version of the Federal government proposal. The second proposal, considers an additional increase of 0.5 percentage points for twelve years. This temporary VAT increase would generate additional revenues of around 2.5% of GDP over twelve years. One-third of the additional revenues would be used towards higher defence spending already budgeted, therefore relieving the general budget by about 0.1% of GDP each year during twelve years. The remaining two-thirds would be used to increase military spending beyond what has already been approved. If accepted, spending on defence would reach 1% of GDP already in 2029. Ultimately, both proposals will require a national vote (Box 1.1; Box 1.6). The reduced VAT rate for everyday consumer goods will remain constant at 2.6% to limit potential effects on low-income consumers. On the spending side, the “relief package 27”, proposed by the government at the end of 2025 and approved by parliament in March 2026 with some modifications, identified small expenditure cuts of 0.2% of GDP in 2027, and 0.25% of GDP thereafter.
Assuming that the government revenue-enhancing and expenditure cuts are approved, and that additional revenue or small spending cuts are considered, the fiscal and the primary accounts corrected for the economic cycle would remain balanced in 2027. Fiscal policy would, in this case, remain broadly neutral in 2027, which would be coherent with a progressive closing of the output gap (Table 1.1), and compliant with the debt brake rule.
Despite the current healthy state of public finances, additional reforms are needed to ensure a sustainable public-debt trajectory in the longer run. Based on the OECD Long Term Model, Switzerland’s debt-to-GDP ratio would start rising steeply around 10 years from now and reach about 140% of GDP by 2060 (Figure 1.10). This baseline scenario assumes that annual real GDP follows OECD projections over 2026-2027 (Table 1.1) and then gradually converges toward a potential output growth of 1%, that demographics will change based on projections from the United Nations, that the relative price of services tends to increase over time, that health expenditure and pension expenditure will increase with ageing, as well as other primary expenditure as the government seeks to provide a constant level of services in real per capita terms, and finally, takes into account recent policy developments, such as higher pension and defence spending. This baseline scenario also incorporates the minor spending cuts from the “relief package 27” and assumes that the proposed permanent VAT rate increase from 8.1% to 8.5% is approved and swiftly implemented. One third of the expected revenues from a temporary VAT rate increase, by an additional 0.5 percentage points over twelve years, are also included in this baseline scenario, assuming the proposal to finance the increase in defence spending already budgeted and included in the expenditures will also be approved.
A scenario that considers further fiscal reforms as quantified in Box 1.3, Figure 1.10 would bring the public debt-to-GDP ratio closer to 120% of GDP in 2060, but without stabilising it (blue line). These include the introduction of regular spending reviews and reforms to improve the efficiency of healthcare spending as discussed below, in addition to an increase in recurrent taxes on immovable property from 0.2% of GDP to 0.3% of GDP as recommended in Chapter 2, and an additional permanent increase in the standard VAT rate beyond what it currently planned and submitted to popular vote. That scenario assumes a total 0.7 percentage point permanent increase in the standard VAT rate, from 8.1% to 8.8%, as originally proposed by the Federal government.
Note: Assumes that annual real GDP follows OECD EO119 projections over 2026-2027 (Table 1.1) and then gradually converges toward a potential output growth of 1%, that demographic changes are based on projections from the United Nations, that the relative price of services tends to increase over time, that health expenditure and pension expenditure will increase with ageing, as well as other primary expenditure as the government seeks to provide a constant level of services in real per capita terms. Considers recent policy developments, such as higher pension and defence spending. Defence spending is assumed to permanently increase to 1% of GDP starting from 2029. When simulating pension costs, all scenarios assume that public pensions grow at ½ the pace of wages, in line with current Swiss law. As the projections are of future developments, they are subject to significant uncertainties. These projections differ significantly from 2024 national projections that were based on different assumptions and underlying data (Federal Department of Finance, 2024[25]).
Source: MIMIC – Macroeconomic Intertemporal Model for Integrated Consolidation, based on the OECD Long-term Model; (Guillemette, 2026[26]) (Guillemette and Turner, 2021[27]) (Guillemette et al, 2019[28]) (Guillemette and Turner, 2017[29]) (Morgavi, 2025[30]).
The implementation of structural reforms, as recommended throughout this survey, could bolster growth (Box 1.4) and bring the debt-to-GDP ratio further down to 80% of GDP by 2060, without changing its upward slope (orange line). The structural reforms considered include further streamlining and digitalisation of administrative procedures, the implementation of the silence-is-consent and once-only principles in regulation, the elimination of barriers in network sectors, and the elimination of restrictions to the practice of several professions, as recommended in Chapter 4. Implementing these reforms would improve Switzerland’s current PMR score from 1.33, close to the OECD average, to 0.91, which is among the best in the OECD. This scenario also assumes positive effects on the labour force, including an increase in the share of women employed full-time, thanks to the provision of additional affordable childcare as recommended in Chapter 4 and previous economic surveys (OECD, 2024[31]), and a rise in the employment rate of older workers thanks to higher spending on active labour market policies.
Bringing public debt back to a broadly sustainable trajectory up until 2060 will ultimately require a more ambitious pension reform than what is currently being considered by the government (see section 1.3.4). The last scenario (green line) assumes that the retirement age gradually increases to 67 in 2034, and by two-thirds of the expected gain in life expectancy, thereafter, as recommended in previous surveys and in section 1.3.4 of this chapter (OECD, 2024[31]) (OECD, 2022[32]).
(1) See section 1.3.2. (2)(3) See Chapter 4 and based on (OECD, 2024[31]). Assumes positive effects on the labour force, including an increase in the share of women employed full-time to the OECD average, thanks to the provision of additional affordable childcare. (4) Assumes a 10% reduction on projected public healthcare expenditure. See section 1.3.3. (5) Assumes the retirement age gradually rises to 67 in 2034, and by two-thirds of the expected gain in life expectancy thereafter, and that the employment rate of workers aged 65-69 increases to the Nordic countries average. See section 1.3.4. (6) Assumes a permanent increase by 0.7 percentage points from 8.1% to 8.8% as originally proposed by the Federal government. (7) See Chapter 2. As the projections are of future developments, they are subject to significant uncertainties.
Source: Federal Finance Administration (FFA); (OECD, 2024[31]); and OECD calculations based on MIMIC – Macroeconomic Intertemporal Model for Integrated Consolidation, based on the OECD Long-term Model; (Guillemette, 2026[30]) (Guillemette and Turner, 2021[31]) (Guillemette et al, 2019[32]) (Guillemette and Turner, 2017[33]) (Morgavi, 2025[34]).
If Switzerland were to adopt the ambitious package of reforms underlying the debt sustainability analysis of Figure 1.10 (green line), GDP per capita could be up to 5.1% higher after 10 years, compared to the baseline scenario (black line). This effect would rise to 8.3% by 2050, and 10.1% by 2060 (Figure 1.11).
Notes: (1) The share of women employed full-time increases to the OECD average, (2) Switzerland improves its current PMR score from 1.33, close to the OECD average, to 0.91, which is among the best in the OECD, based on recommendations from Chapter 4; (3) The retirement age gradually rises to 67 in 2034, and by two-thirds of the expected gain in life expectancy thereafter, and the employment rate of workers aged 65-69 increases to the Nordic countries average. As the projections are of future developments, they are subject to significant uncertainties.
Source: MIMIC – Macroeconomic Intertemporal Model for Integrated Consolidation, based on the OECD Long-term Model (LTM); (Guillemette and Turner, 2017[29]) (Guillemette, 2019[33]) (Guillemette et al, 2019[28]) (Guillemette and Turner, 2021[27]) (Guillemette, 2026[26]) (Morgavi, 2025[30]).
Note: As the projections are of future developments, they are subject to significant uncertainties.
Source: MIMIC – Macroeconomic Intertemporal Model for Integrated Consolidation, based on the OECD Long-term Model (LTM); (Guillemette and Turner, 2017[29]) (Guillemette, 2019[33]) (Guillemette et al, 2019[28]) (Guillemette and Turner, 2021[27]) (Guillemette, 2026[26]) (Morgavi, 2025[30]).
1.3.1. Addressing tax distortions can increase labour supply
Progress in personal income tax (PIT) reform has reduced labour market distortions. Switzerland’s current PIT system is progressive and based on the household as a taxing unit, meaning that it is based on individual income for unmarried taxpayers and the couple’s joint income if married. The joint taxation of married couples tends to increase the marginal personal income tax of second earners, reducing their incentives to work (Harding, 2023[34]). In a welcome development, Switzerland decided to move towards individual taxation on March 8, 2026 (Box 1.6). Since the reform requires changes to cantonal tax systems, it is not expected to be implemented before 2032. Once enacted, the federal government expects the reform to reduce federal tax revenues by about 0.07% of GDP while raising labour supply for second earners by around 0.2% in the medium-term, which might eventually increase revenue collection (ESTV, 2025[35]).
Other changes in the tax and benefit system could increase incentives to work and bring additional tax revenues in the longer term. As highlighted in the 2024 OECD Economic Survey, tax revenues are tilted towards direct taxation, including personal income taxes, corporate taxes and social security contributions. In contrast, taxes on the consumption of goods and services generate lower revenues relative to GDP and total tax revenues than in other OECD countries (OECD, 2024[31]). Shifting part of the tax burden from personal incomes to consumption may help increase labour supply, encourage entrepreneurial activity and investment more broadly. The government proposals to increase the standard VAT rate, discussed above, would be consistent with such recommendation. Changes in the standard VAT rate should, however, be accompanied by a thorough analysis of distributional effects and an assessment of the overall progressivity of the tax system over a taxpayer’s lifetime. In fact, consumption taxes can have regressive effects in the short-term as lower-income households spend a greater share of their current income on consumption than higher-income households. But a policy package in which revenues from a higher standard VAT rate are used to finance the first pillar of the pension system - which is the main source of income for low-income pensioners - may turn out to increase the overall progressivity of the tax and benefit system.
As a federal country where cantons have far-reaching autonomy for the taxation of personal income, wealth and corporate profits, Switzerland has long been characterised by strong internal tax competition. Subnational government tax revenues account for about 11% of GDP and 56% of public tax revenues, excluding social security contributions (OECD, 2025[16]). Tax competition has played a role in keeping tax rates low and public spending in check. Another advantage is that residents can evaluate policy results in their jurisdiction compared to others, which has proved to enhance accountability and increase the quality of political decision-making. Yet, unchecked tax competition can also generate inefficiencies and inequities. Recent evidence shows that successive cuts in canton-level corporate tax rates have been associated with a steady erosion of cantonal corporate tax revenues relative to that of the federal government (Brülhart et al., 2023[36]).
Several forces counteract the effects of this race to the bottom. For one, the federal corporate tax puts a floor on the combined CIT rate. Tax competition among cantons could have also been mitigated by a tax harmonisation law in 2001, mandating common tax bases across layers of government. Intragovernmental transfers from the financial equalisation system also ensure some harmonisation in the level of public services across cantons (Frey, Gorgas and Schaltegger, 2017[37]). Finally, the approval of the OECD minimum tax rate by popular vote in June 2023 has led to the creation of supplementary taxes to ensure the minimum taxation of Swiss-based corporate groups and of foreign business units of corporate groups based elsewhere if such units are not already subject to minimum taxation, the latter being known as the Income Inclusion Rule of Pillar 2 (OECD, 2021[38]). Consolidated tax revenues could increase by somewhere between CHF 1.0 billion to CHF 2.5 billion already in 2026, and CHF 1.5 billion to CHF 3.5 billion from 2027, reaching up to 0.4% of GDP (EFD, 2024[39]).
Recurrent taxes on immovable property present opportunities to increase tax revenues in the medium-term while helping to increase housing supply responsiveness and improve housing affordability, as discussed in Chapter 2. This could be achieved through more frequent property valuation updates and increasingly basing such updates on recent sales or rent data for similar properties, without increasing the tax rate. The property valuation system needs to remain simple to limit administrative costs and ensure enforceability. Limiting deductions to real estate capital gain taxes and widening the scope for the recently introduced land value incremental tax would also help (see Chapter 2).
1.3.2. Regular expenditure reviews could further increase public spending efficiency
Extensive bottom-up consultations, including a group of experts, all political parties represented in parliament, ministries in the Federal Council, cantons, and social partners, have been conducted between March 2024 and January 2025 to identify targeted expenditure savings for the 2027 budget. These proposals were subsequently prioritised by the Federal government and debated in parliament, resulting in the “relief package 27”. Yet, this review process has been triggered mainly by political pressure to achieve savings in the short-term, to maintain compliance with fiscal rules. Some of the measures imply cuts in flagship programmes, namely funds directed at the Swiss National Science Foundation, whose objective is to promote research and innovation (EFD, 2025[40]). Such broad-based spending cuts may undermine the quality of expenditure by cutting spending for high-performing ministries and programmes, and services that are already under-resourced, with potentially negative consequences for long-term growth.
On a more regular basis, each year, one of the seven federal departments conducts reviews of public subsidies, with results reported to parliament and eventually translated into concrete proposals for multi-year financial resolutions or amendments to existing subsidies. Such reviews are conducted using a standardised questionnaire that analyses the rationale, scope, structure, management, and procedure for granting public subsidies. Switzerland could consider extending the scope of such regular reviews to all public spending, beyond public subsidies. Such broad, systematic and regular public spending reviews can be particularly effective when they are systematically linked to the annual budget process and have indeed become best practice among OECD countries (OECD, 2022[41]) (OECD, 2025[42]). Annual spending reviews can examine whether programmes achieve their objectives and remain relevant, even when the fiscal position and outlook improve. In the Netherlands, for example, the timeline for reviews is designed so that findings are available in time for the budget formulation process and recommendations that have a direct effect on spending are systematically integrated into the budget.
1.3.3. More efficient spending on healthcare and long-term care can create savings
The Swiss healthcare system delivers among the best health outcomes in the OECD, but this comes at a cost (OECD, 2025[43]). Switzerland is among the countries that spend most on healthcare and long-term care as a percentage of GDP (Figure 1.12, Panel A). Healthcare and long-term care expenditure is primarily funded through private mandatory health insurance premiums and out-of-pocket payments, with the federal government, cantons, and municipalities contributing about 30.5% of total costs or 3.5% of GDP (BFS, 2025[44]). Structural cost drivers such as population ageing, rising wages and incomes and medical advances will continue to exert sustained pressure on health spending. Based on recent federal government estimates, total healthcare expenditure is projected to rise from 11.2% of GDP in 2023 to 15.3% of GDP by 2060. From a health policy perspective, sustained expenditure growth risks undermining access and quality of care. From a fiscal perspective, growth in healthcare and long-term care absorbs increasing budget shares at the federal, cantonal and communal levels, thereby crowding out other public expenditure. Sustained expenditure growth is also likely to intensify calls for greater tax-based financing of the health system, affecting the division of responsibilities between different layers of government and posing risks to the overall sustainability of public finances (Colombier, Lerch and Brändle, 2026[45]).
Switzerland’s healthcare system combines a mix of public and private provision with strong government regulation. All residents, including foreigners and asylum seekers, must buy a basic health insurance policy from a licensed private insurer. Licensed non-profit private insurers cannot refuse subscribers, and the basic benefit package is defined by law. They set their own premiums each year but cannot discriminate by health status, occupation or income. Premiums can only vary by age group and place of residence. Beyond the mandatory package, individuals can buy a supplementary health insurance package. These voluntary packages are fully risk-rated, with unregulated market premiums based on age, health and other personal characteristics.
Cantons provide income-based subsidies to disadvantaged groups to cover part of the mandatory health insurance premium, jointly financed by the federal government. Each canton has some margin to determine who is eligible for premium reductions and by what amount. Overall, about 30% of residents received such subsidies (BAG, 2024[46]). About 50% of beneficiaries were households with a gross monthly income of up to CHF 4 000, 30% were households whose earnings range between CHF 4 000 and CHF 8 000, and 20% were households with earnings above CHF 8 000, meaning above the average monthly income of CHF 7 186 in Switzerland. Since January 2026, cantons have been required to make a minimum contribution to the financing of premium reductions to contain the financial burden on households (Figure 1.13). Through these subsidies, rising costs and premiums have an immediate fiscal impact. The federal government is also affected as it reimburses cantons for 7.5% of the gross costs of mandatory health insurance to co-finance premium reductions (BAG, 2025[47]).
Moreover, cantons own and operate many hospitals and nursing homes, co-finance inpatient health services, licence healthcare professionals, and monitor local insurance markets. The introduction of the uniform financing system for healthcare services, approved in November 2024, will shift more of the financing burden from health insurance plans to cantons and municipalities. From 2028 onwards, cantons are also expected to contribute to the financing of outpatient services, which will raise spending needs at least in the short-term. Further measures to improve efficiency and contain expenditure growth in healthcare are therefore warranted.
Coordination among cantons is often difficult and each canton tends to plan primarily for its own population, leading sometimes to overlapping capacity across cantonal borders (BAG, 2026[48]). Moreover, cantons in rural areas are often reluctant to close small hospitals, even if their scale is not cost effective. The federal government has taken initiatives to improve inter-cantonal coordination. In 2022, it required cantons to agree on uniform assessments of economic efficiency and quality to be performed throughout the country. The methodology for these uniform assessments is still under development. Cantonal planning decisions can now be appealed by hospitals and licensed insurers, thereby allowing federal intervention if needed. Moreover, in January 2026, the Federal Council recommended cantons to base hospital planning on supra-regions reflecting patient flows rather than cantonal borders to reduce overcapacity, but these recommendations are not binding (BAG, 2026[48]). An on-going discussion in parliament aims even further, with the Federal Council seeking to amend the legal and constitutional basis so that hospital planning be carried out by the Confederation in close cooperation with the cantons.
Health expenditure, 2025
Source: OECD Health expenditure and financing database.
Source: Office fédéral de la santé publique OFSP ; OECD Average annual wages.
Switzerland spends comparatively little on preventive care to address risk factors associated with major chronic diseases and conditions, such as diabetes, obesity and cancer (Figure 1.14). Prevention is both effective and value for money for improving health outcomes (Ford et al., 2021[49]), suggesting scope for reallocating resources towards prevention and nationwide public health programmes under the purview of federal authorities.
Healthcare providers compete for patients and operate on a fee-for-service basis, within regulated frameworks aiming to reduce incentives for over-servicing. Insurers are billed for outpatient services based on uniform national schedules and for inpatient services based on Diagnosis-Related Group (DRG) payments. DRG payments are calculated on the basis of a hospital-specific base rate, which is negotiated between hospitals and insurers within each canton and approved by cantonal governments. This system leaves substantial leeway for hospitals to fix base rates with no efficiency benchmark. One way forward would be to require hospitals and insurers to derive base rates from benchmarking hospitals based on the uniform assessment of economic efficiency and quality currently being developed by the cantons.
Note: The OECD is currently revising its methodology to estimate spending on preventive care. The current methodology tends to underestimate spending on preventive care for all countries. In panel B, “data for Iceland, Mexico and Türkiye refer to women aged 40 69, data for Israel to women aged 50 74 and data for Sweden to women aged 40-74. Data for the United Kingdom refer to England”.
Source: OECD Health at a Glance 2025.
The complex and fragmented financing from multiple sources may stand in the way of a stronger focus on controlling the overall healthcare spending and financing bodies may not always be looking for more cost-effective solutions (Figure 1.15). Single-payer public health insurance systems may be less prone to such cost monitoring problems, but Swiss voters rejected that option in 2014. A popular initiative to trigger mandatory cost-containment measures if annual healthcare cost increases exceed wage growth by more than 20% was also rejected in June 2024. A recent proposal by the federal government to establish cost targets negotiated every four years came into force on 1 January 2026. The proposal has the merit of triggering a public discussion on additional measures to contain healthcare expenditure growth.
Healthcare payment models based on fee-for-service often tend to neglect coordination (Yordanov et al., 2024[50]). Developing managed-care models, where insurers can offer reduced premiums for plans where patients seek care within a restricted network of providers, facilitates information sharing among practitioners within the network, thus reducing the risk of over-consultation and over-servicing. However, despite attempts to promote managed-care models, their uptake has been limited to scattered local initiatives (Peytremann-Bridevaux et al., 2021[51]). Experiences in Europe and the US with financial incentives to promote managed-care network membership could provide inspiration for Switzerland, building on voluntary regional initiatives with clear incentives for case management and prevention of avoidable hospitalisations. These include paying a single fee for a bundle of services needed to provide the required care (bundled payment models) or letting providers keep a proportion of jointly obtained savings compared to a pre-set target (shared savings models). A new tariff system came into force in early 2026 proposing flat rates for some ambulatory care treatments, which should be carefully monitored and assessed regarding its impact on over-consultation and quality of care.
Financing of health care and its costs by service and financing scheme, 2023
Source: FSO.
Over-consultation and over-servicing can also be mitigated via “gatekeeping” by general practitioners (GPs), which has been identified as an effective way to contain spending by limiting unnecessary hospital expenses (OECD, 2025[52]). In contrast to OECD countries with strict gatekeeping like the UK, Sweden, and the Netherlands, patients in Switzerland are free to see specialists and seek hospital care directly, while having a GP is not mandatory. Patients can voluntarily opt into a system of gatekeeping in exchange for lower premiums. Around 65% of the population has done so, suggesting that there is still room for improvement. Consequently, spending on primary healthcare services is low and the number of GPs has been outpaced by specialist medical practitioners over the last ten years (Figure 1.16). The authorities could consider reinforcing the role of GPs as gatekeepers to secondary healthcare services through a stricter referral system.
Hospital stays tend to exceed the OECD average and the number of hospital beds per 1 000 population is relatively large (OECD, 2025[52]). Moreover, the share of surgical procedures carried out as ambulatory cases is low compared to other countries (Figure 1.17). In a welcome move, some cantons and the federation have recently introduced lists of surgical procedures that have to be provided as outpatient care. By shortening treatment duration, ambulatory surgery can save resources without any adverse effects on quality of care and allow hospitals to focus on more complex cases. Outpatient care and ambulatory surgery should be prioritised as much as possible where deemed safe on medical grounds. A reform approved by popular vote in November 2024 is also expected to reduce disincentives against the use of ambulatory care as currently, medical services provided through ambulatory care are fully financed by health insurers, without any contribution from the cantons, while for in-patient hospital services, cantons co-financed at least 55% of total costs. These differences in cantonal contributions create a bias towards hospitalisations. The recent reform introducing uniform financing for inpatient and outpatient care is set for gradual implementation by 2028 and could produce significant efficiency gains in the medium to long-term.
Note: In Panel A, spending on general outpatient care can include pharmaceuticals for Mexico and Costa Rica.
Source: OECD Health at a Glance 2025, OECD Physicians by categories.
Share of surgical procedures carried out as ambulatory cases, 2023 or latest year available
Source: OECD Health at a Glance 2025.
A rapid diffusion and widespread use of electronic health records, telemedicine and artificial intelligence offer opportunities to improve cost-efficiency, but their dissemination has been slow compared to other OECD countries. A national agency, eHealth Suisse, was established in 2007 to coordinate electronic health initiatives. Since the 2017 Federal Act on the Electronic Health Record, uptake has remained critically low. In response to this slow deployment, the federal council initiated a comprehensive revision of the legislation in November 2025, with implementation foreseen by 2030. This major reform introduces an opt-out model and intends to make electronic health records mandatory across the entire healthcare system, including for outpatient services. The confederation will assume responsibility for developing and financing the central technical infrastructure, replacing the current system of fragmented platforms and significantly strengthening interoperability, data security and privacy standards. Targeted population communication campaigns on the tangible benefits of EPR use, financial incentives for general practitioners, and the adoption of interoperability standards into practice management software should reinforce public trust and reduce administrative friction across cantons, helping to unlock both the primary and secondary use of health data. Designating the electronic health record as the data gateway for reimbursement claims would also create a structural incentive for provider participation, without requiring separate enforcement mechanisms.
Teleconsultations and digital tools can be used for triage, helping to avoid unnecessary visits to emergency services or hospitals, and for chronic-patient remote monitoring, freeing up resources and time that can be reinvested in patient-focused activities. Some insurers are encouraging teleconsultations, by offering lower health insurance premiums in exchange, for example. Yet, patient surveys show that the acceptability of video consultations remains modest, especially among older patients (Mazouri-Karker et al., 2023[53]). Differences in uptake patterns could be addressed through targeted measures that could include digital literacy programmes, tailored interfaces, providing data-free mobile access for patient portals, or reducing fees for telehealth. Moreover, developing a publicly available repository of providers offering teleconsultations and integrated into existing patient-facing platforms could improve awareness and uptake among patients and referring providers, at relatively low cost.
Artificial intelligence could play a critical role in improving cost-efficiency by automating labour-intensive tasks in health service delivery such as summarising clinical notes or triaging patient information. Trials in the United Kingdom’s National Health Service have shown positive results when AI-scribes were used, with a 23.5% increase in direct patient interaction during appointments, an 8.2% reduction in overall appointment length, and a 13.4% increase in patients seen per shift. The study estimates that scaling-up the use of AI-scribe nationally could generate savings of about GBP 658 million annually (NHS, 2025[54]). The federal government, in collaboration with cantons, could use the OECD AI in Health Policy Checklist to assess the Swiss health system’s readiness for AI deployment and inform the development of AI in health strategy to anticipate gaps and lay the foundations for responsibly scaling AI in health (OECD, 2026[55]).
Rising drug prices are also contributing to the increase in total healthcare costs and health insurance premiums. Medicines account for more than 20% of costs in the compulsory health insurance package and Switzerland has among the highest prices for medicines in Europe and the OECD (BAG, 2025[56]) (TLV, 2024[57]), resulting in high spending on medicines in international comparison (Figure 1.18). The share of generics by value is low in international comparison (Figure 1.19, Panel A). Similarly, the market share of biologics and biosimilars, a class of medicines manufactured in, or sourced from, living systems such as microorganisms, or plant or animal cells, is also lower than other OECD countries (Figure 1.19, Panel B).
Generics and biosimilars introduce price competition in retail medicines, representing an opportunity for cost containment in pharmaceutical spending (OECD, 2025[52]). Many countries have implemented incentives for physicians, pharmacists and patients to boost generic markets. For instance, Japan established a roadmap to increase generic uptake in 2013. Since then, the government has steadily raised its targets and implemented various measures, including incentives for hospitals and pharmacies. In France, pharmacies receive bonuses if their generic substitution rates are high. Switzerland reinforced a rule in January 2024 that increases patients’ co-payment for patented drugs that are significantly more expensive than the generic equivalent. The authorities should monitor the impact of this reform to assess whether additional measures are needed.
Note: Includes medical non-durables for Greece, Italy, Ireland, Hungary, Lithuania, Portugal, the Netherlands, Israel and Chile.
Source: OECD Health at a Glance 2025.
Source: OECD Health at a Glance 2025.
1.3.4. A more comprehensive reform will be needed to preserve the pension system’s sustainability
Simulations by the Federal Social Insurance Office show that with the 13th old-age pension payment, the public pay-as-you-go system will post a deficit as early as 2026 (BSV, 2025[58]). As spending on old-age pensions continues to outpace receipts, the deficit is expected to grow even further, reaching about 0.4% of GDP in 2035. The parliamentary proposal to increase the standard VAT rate by 0.4 percentage points, if approved by popular vote, would partially finance the additional spending. However, additional measures are needed for the public pay-as-you-go system to remain sustainable (BSV, 2025[58]).
The government is currently working on an outline for an old-age pension reform, whose preliminary draft was presented in the spring of 2026 and is currently under public consultation. For the moment, there are no plans to raise the retirement age in the first pillar, beyond recent changes harmonising the retirement age of women and men. Instead, the government aims at encouraging people to continue working beyond the minimum early retirement age of 63 years old in the first pillar, at which people have the legal right to a pension with an early-retirement penalty, and even beyond the reference retirement age of 65 years old, which is the eligibility age to receive a full pension without penalty from the first pillar. One measure under consideration is to adapt early-retirement penalties and pension accrual bonuses for delayed retirement to improve incentives to work. In addition, the Federal government also aims to abolish the maximum age until when contributions for the first pillar improve pensions. In the current system, workers can defer retirement beyond the reference retirement age of 65 and until the age of 70, but beyond 70, they will continue to pay contributions without increasing their future pension. Finally, it is also considering raising the social security payment exemption threshold for workers aged 65 and above to increase working incentives to remain active beyond that age. Other changes under consideration affect the second pillar of the pension system, which is an occupation scheme with a mandatory component, supplemented by most employers on a voluntary basis (OECD, 2024[31]). The minimum retirement age to access pension payments from this second pillar will be increased from 58 to 63 years old with a ten-year transition period.
With a reference retirement age of 65 in the first pillar, i.e. the age of eligibility of all pension schemes combined without penalty based on a full career, Switzerland is below that of most OECD countries (OECD, 2025[59]). The normal retirement age is expected to reach 70 years in Italy, the Netherlands and Sweden, 71 years in Estonia, and even 74 years in Denmark based on established links between the retirement age and life expectancy. The eight countries with the highest future normal retirement age are all countries with automatic links of the retirement age to life expectancy, including also Finland, Portugal and the Slovak Republic. Norway is expected to introduce such a link and increase its retirement age by two-thirds of life-expectancy gains soon (OECD, 2025[59]). To ensure public debt sustainability in the longer-term, while maintaining current public service standards and benefits, and based on simulations from the OECD Long Term Model discussed in the introduction to section 1.3 and Figure 1.10, will eventually require increasing the reference retirement age, as already recommended in previous OECD Economic Surveys of Switzerland (OECD, 2022[32]) (OECD, 2024[31]).
Swiss exports of goods and services accounted for approximately 78% of GDP in 2025, compared with an OECD average of 30%. Imports of goods and services amounted to around 69% of GDP. These numbers are buoyed by trade in gold and precious metals, but they reflect a strong openness to international trade. Trade will play a crucial role for future growth prospects, which places efforts to strengthen ties with key trading partners and new trade partnerships to expand potential export markets at the centre of economic policy priorities.
Major destinations for Swiss goods exports include the European Union, the United States, and China, while key goods exporting sectors are chemicals and pharmaceuticals, valuables including gold and jewellery, and precision instruments including precious metal watches (Figure 1.20, Panel A and B).
The services sector represents a significant share of international trade, accounting for about 25% of total exports or 20% of GDP. The European Union and the United States are also Switzerland’s main trading partners for services. The most important services exports are licences and fees, financial services, information and telecommunication technologies, and tourism (Figure 1.20, Panel C and D). The United Kingdom is also a major services exports destination, with financial and insurance services accounting for a larger share than for other countries.
The movement of goods between Switzerland and the EU has been governed by a Free Trade Agreement dating back to 1972, numerous sectoral agreements as well as unilateral policy measures in Switzerland to further reduce technical barriers to trade. As a result, Swiss companies in industries such as metals, automotive, machinery are highly integrated into EU supply chains and cross border cooperation is especially strong, not least in research and development. Since Switzerland is not an EU member, it pursues its European policy on the basis of bilateral sectoral agreements. Switzerland does not participate in the common agricultural and fisheries policies, is not part of the customs union, and pursues an independent trade policy, for example. At the same time, the EU, increasingly ties single market access to the application of rules that are valid for EU members. Trade in services, on the other hand, is covered by specific sectoral agreements.
Source: OECD calculations based on UN Comtrade, SNB.
The new Swiss-EU package of agreements, approved by the Federal Council in March 2026, aims at stabilising and further developing the bilateral approach with the EU (Box 1.5). Cooperation will be strengthened in several key areas: electricity, research, health, and food safety. The new package also gives Switzerland access to Horizon Europe, the EU's key funding programme for research and innovation (Swissuniversities, 2025[60]). Overall, the package has the potential to bring significant benefits to the Swiss economy and in an increasingly uncertain international environment, stable relations with the EU remain of central importance for Switzerland. The package is currently being debated in Parliament, after which a popular vote on the package is expected. The Swiss Federal Council has decided to call an “optional” referendum on the agreements with the European Union. Parliament will make the final determination regarding the nature of the referendum on the package (Box 1.5; Box 1.6).
The United States accounts for more than 20% of total Swiss exports of goods, including valuables, making the US the largest single country export destination, followed by Germany, the UK, and China. Few other countries have similarly strong trade ties with the US (Figure 1.20, Panel A). As a result, Switzerland is strongly affected by changes to the trade policies that govern this bilateral trade, such as the recent hikes in US import tariffs. Switzerland concluded a non-binding joint statement with the US in November 2025, lowering the country-specific additional tariff rate from 39% to 15%, if the US most-favoured nation tariffs exceed 15%, which brought it in line with European neighbours. Since the US Supreme Court ruling against the IEEPA tariffs, in February 2025, Swiss exports to the US have been facing an additional 10% tariff. The share of total goods exports to the EU amounts to 38%. More recently, the consideration of additional duties of 12.5% under section 301 of the Trade Act of 1974 has added to the uncertainty. Uncertainty over future US tariffs and lower global demand, especially among Switzerland’s main European trade partners, will affect exports growth (Figure 1.21).
Relations between the EU and Switzerland are governed by a series of bilateral agreements, i.e. a package of sectoral agreements known as “Bilaterals I”. The agreements include provisions such as the free movement of persons and the provision of cross-border services under a limited amount of time. The Mutual Recognition Agreement ensures that, in twenty regulated sectors, the conformity assessment provided by one party is recognised by the other, which facilitates trade between the parties. The Agreement on trade in agricultural products includes sanitary and phytosanitary rules, as well as tariffs and tariff quotas for agricultural products.
Another set of sectoral agreements was signed in 2004, known as “Bilaterals II”, covering Switzerland's participation in the Schengen area and Dublin asylum system, and agreements on the taxation of savings, processed agricultural products, statistics, combating fraud, participation in the EU Media Programme and the European Environment Agency.
In 2014, the EU and Switzerland agreed to renegotiate and restructure participation in the internal market, notably by clarifying rules and procedures for the adoption and homogenous application of internal market law, for enforcement of state aid rules, and dispute settlement, within the so-called Institutional Framework Agreement (IFA). The Federal Council decided not to sign that institutional framework agreement on the grounds that the necessary conditions were not met. Between 2022 and 2023, Switzerland and the EU held exploratory talks regarding the conclusion of a new broad bilateral package. The subsequent negotiations resulted in the signing of new agreements known as the “Stabilisation and further development of Switzerland-EU relations” package of agreements or “Bilaterals III” in March 2026.
Source: Swiss federal authorities, Federal Department of Foreign Affairs (FDFA).
Swiss goods exports to the US and Europe are dominated by the chemical and pharmaceutical industries where Swiss exporters operate at the high-value end of the production chain. These companies exhibit strong productivity growth, while other manufacturing industries have barely grown in the last years (Figure 1.22). Reliance on a few sectors exposes the entire economy to sector-specific shocks, and the outlook for the pharmaceutical sector is one of the main risks to the growth projections. The US has recently announced a sector-specific tariff rate of up to 100% on patented medicines starting July 31, 2026, unless pharmaceutical companies increase their investments in the US. However, for countries with existing trade frameworks, including Switzerland, a reduced additional tariff rate of 15% will apply to the patented pharmaceutical products and active ingredients defined in the joint statement from November 2025. While major drug makers in Switzerland have already reached agreements that should allow them to temporarily escape the levies, some uncertainty remains.
Note: Computation based on the imports of merchandise of the USA and the EU, and the current GDP in US$ of each country.
Source: OECD calculations based on UN Comtrade, OECD Economic Outlook database.
Upgrading the current free trade agreement (FTA) with China could provide further opportunities. The existing agreement, enacted in 2014, eliminated most tariffs for Swiss exports, allowing exports of goods to China to grow 67% from 2014 to 2025, but some products like watches and pharmaceuticals still face significant tariffs. Exports of services to China also increased from 2.6% of total Swiss services exports in 2014 to around 4% in 2025 (Figure 1.20, Panel C). Negotiations to revise the current terms of the FTA started in 2024, with the objective of strengthening cooperation in higher-value and technology-driven sectors, and services trade, including intellectual property and digital services.
Switzerland has made significant progress to enhance its services trade relationship with the United Kingdom. The Berne Financial Services Agreement with the United Kingdom creates significant growth opportunities for firms in investment services, insurance, and asset management. The agreement entered into force in January of 2026 and introduces outcomes-based mutual recognition of each country’s regulatory framework, rather than requiring harmonisation of rules. The agreement thus streamlines access to financial services between the UK and Switzerland by eliminating the need to obtain an additional license when offering cross-border services. Further guidance from FINMA, the financial supervisory authority, and published guidelines to support the successful implementation of the agreement would help fully exploiting potential benefits.
Switzerland is also seeking to expand to new markets. The European Free Trade Association (EFTA), of which Switzerland is a member, signed an Economic Partnership Agreement with India, an important merchandise trading partner (Figure 1.20, Panel A), which entered into force in 2025. The agreement eliminates most tariffs on industrial products, which could benefit Swiss firms exporting pharmaceuticals, metals, machinery, and precision instruments, among others. EFTA has also signed new trade agreements with MERCOSUR, Malaysia and Thailand, pending ratification. The agreements cover a wide range of items, including trade in goods and services, investment, intellectual property, government procurement, and non-tariff barriers to trade. Ratifying these agreements would strengthen Switzerland’s economic resilience by lowering dependence on the current main trading partners.
Providing more information on how companies can utilise existing FTAs and use preferential rules of origin would help to further strengthen the resilience of Switzerland’s position in global value chains and facilitate export diversification as recommended in the 2024 OECD Economic Survey of Switzerland. Chapter 4 discusses additional policy recommendations to improve enabling conditions, consolidate Switzerland’s innovation lead and strengthen competition, with a view towards maintaining high levels of integration in global markets, facilitating stability and long-term growth.
Note: All variables are seasonally and calendar adjusted, and at constant values. The weight of each sector in 2020 is 19% - Trade, transport and hospitality; 12% - Manufacturing except chemicals and pharmaceuticals; 9% - Financial and insurance activities; 7% - Chemicals and pharmaceuticals; 7% - Public administration; and 5% - Construction.
Source: SECO, OECD Economic Outlook database.
March 2024: “Popular initiative for a better life in old age” – Approved. On 3 March 2024, Swiss voters decided in favour of a 13th month Old-Age payment per year in the 1st pillar of the pension insurance system, but against gradually raising the statutory retirement age.
June 2024: “Amendment of the Energy Act and the Electricity Supply Act” – Approved (See Chapter 3). Establishes ambitious targets, to be reached in co-operation with the Cantons, the energy sector and other stakeholders, on the production of energy from renewable sources. Households' final energy consumption must be stabilised by 2030 at the level it would have had at the entry into force of this provision.
November 2024: “Amendment of the Federal Act on Health Insurance” – Approved. Financing of healthcare is now standardised among medical service providers to encourage outpatient treatment and ambulatory surgery.
September 2025: “Federal decree on Cantonal Property Taxes on Secondary Properties” – Approved (See Chapter 2). Cantons are now allowed to introduce a special property tax on predominantly owner-occupied second homes. This vote is not only about second homes, but also about abolishing the imputed rental value, a longstanding and often controversial feature of the Swiss tax system.
March 2026: “Federal Act on Individual Taxation”- Approved. Joint taxation of married couples will be replaced with mandatory individual taxation for all taxpayers, effective at the latest by 1 January 2032 and affecting federal, cantonal and municipal tax filings.
November 2026 (expected): VAT tax increase by 0.4 p.p. to fund pension increases.
Other referendums expected by 2027 or 2028: Temporary VAT tax increase by 0.5 p.p. to fund defence spending; Ratification of the agreements with the European Union.
Source: Federal Chancellery, The Federal Council.
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