CURRENT MACROECONOMIC POSITION

Current Macroeconomic Position of Switzerland



Current Macroeconomic Position of Switzerland

Introduction

Switzerland has enjoyed an energetic economic recovery afterwards 2004. Growth has exceeded euro area effects for three consecutive years, after featuring lagged behind during the preceding ten years. Nevertheless, some of the elements fuelling the current upswing are potential to demonstrate irregular The important contribution of financial sector expansion has benefited from cyclical strength in global financial markets, which could be coming to an end, and the manufacture of a depreciating exchange rate and above-potential growth in important trading partners trade, especially in Germany. On the other hand, immigration flows have increased and have the potential to make a longer-lasting positive contribution to aggregate supply. (Locher, 2002, pp. 54-59)

Decomposition of GDP per capita in PPP terms

Source: OECD, Annual National Accounts database and productivity database

Based on current purchasing power parities and current prices.

The employment of resources is measured as the total number of hours worked divided by population.

Labour productivity is measured as GDP per hour worked.

The level of labour productivity across the economy is lower than in many other high-income countries of the OECD and has lagged behind since the end of 1990, held back by weaker outcomes in sectors that are sheltered from international competition. In 2004, the government launched a "growth package", including a series of measures to increase productivity. However, many of these measures are either not yet legislated or newly introduced. It intends to propose a new package of measures to parliament to strengthen potential growth in the next four years. While the general government balance has swung into surplus, spending on social services continues to grow strongly (Mathias, 2006, pp 45-49). This can compromise the ability of fiscal policy to support turning what is a substantial cyclical expansion into a permanent acceleration of potential output. The fundamental policy challenges, therefore as follows:

Improved long-term sustainability of public finances and reducing tax distortions. Budgetary rules across all levels of government as well as control of tax rates through the exercise of direct democracy and tax competition among sub national levels of government, have helped exercise overall spending restraint. However, better control of social expenditures would be avoided right disincentives to labour supply and free up resources for measures more conducive to growth. Tax reforms could provide stronger support to the participation of the workforce and entrepreneurship.

Increasing the contribution of productivity improvements to potential economic growth. Switzerland continues to lag behind in a series of regulatory policy areas in which reforms in favour of competition in product markets have had a marked impact on productivity performance in all OECD countries. Application of "growth package", previously the government has to be completed rapidly and followed by other measures, are described below.

Reforming the regulation of product markets and containing social spending were also identified as policy priorities in 2007 the OECD go for publication growth.

The recovery strengthened in 2006 and has consolidated in 2007, 2006 marked the fourth year of expansion, with ...