Table Of Content'i R C'H') VEJj*!*
:«
OECD
ECONOMIC SURVEYS
SWITZERLAND
MARCH 1975
BASIC STATISTICS OF SWITZERLAND
THE LAND
Area(I 000sq.km.) 41.3 Majorcities. 1973mid-yearestimates
Cultivated land,grasslandandpastures (1000inhabitants):
(1000sq.km.,in 1972) 20.2 Zurich 410.1
Forest(1000sq.km.,in 1972) 10.5 Basle 204.9
Geneva 168.6
Bern 157.7
THE PEOPLE
Population, 1973average,estimates Numberofforeignworkerssubjectto
(1OO0) 6431 control(1 000):
No.ofpersonspersq.km. 156 April 1974 525.3
Netannualrateofpopulationincrease August 1974 551.3
(per 1 000inhabitants, 1968-1972) 9.0 Annualaverageincreaseinthenumber
Labourforce, 1973 (1000) 3097 offoreignworkerssubjecttocontrol,
Percentagedistribution,secretariatestim¬ Augustcensus(1000):
ates: 1956-1964 50.0
Agriculture 7.3 1965-1974 -17.0
Industryandconstruction 46.2
Other 46.5
PRODUCTION
GrotsNationalProductin 1973 Valueaddedbyindustrialoriginin 1967
(billionSwissfrancs) 129.4 (inpercentofGDPatfactorcost):
Growthofreal GNP, 1971-1974average Agriculture 6.4
(annualrate, percenl) 3.3 Industry 49.6
Grossfixedinvestmentin 1973 Other 44.0
(inpercentofGNP) 27.9
Growthofrealfixedinvestment.1971-
1974 average (annual rate, per cent) 1.8
THE GOVERNMENT
Publicconsumptionin 1973 CompositionofParliament
(inpercentofGNP) 11.4 (percent):
Taxrevenuein 1972 National State
(inpercentofGNP) 16.2 Council Council
Publicdebtinpercentofcurrentreceipts
(1973) 61.9 ConservativeChristian
Socialists 22.0 31.6
RadicalDemocrats 24.5 34.1
Socialists 23.0 9.1
Agrarians 11.5 11.4
Other 19.0 6.8
Lastelections: 1971
Nextelections: 1975
FOREIGN TRADE
Exportsofgoodsandservicesincluding Importsofgoodsandservicesincluding
factorincomesasapercentageofGNP factorincomesasapercentageofGNP
(average 1969-1973) 37.3 (average 1969-1973) 34.8
Commodityexports Commodityimports
(fob,million USdollars, 1973) 9525 (cif,million USdollars, 1973) 11 621
Percentagedistribution(1973): Percentagedistribution(1973):
ToOECDcountries 77.0 FromOECDcountries 89.6
Todevelopingcountries 16.9 Fromdevelopingcountries 7.8
Food,drinksand tobacco Food,drinksandtobacco
(S1TCgroups0and1) 4.6 (SITCgroups0and 1) 12.4
Materials(2, 3,4) 2.4 Materials(2,3,4) 12.3
Semi-finishedgoodsandchemicals Semi-finishedgoodsandchemicals
(Sand 6) 38.4 (5and6) 32.2
Finishedmanufacturedgoods(7,8, 9) 54.6 Finished manufacturedgoods (7, 8,9) 43.1
THE CURRENCY
Monetaryunit:Swissfranc CurrencyunitsperUSS:
(a) Centralrateestablishedin
December 1971 3.84
(fr) Since23rdJanuary1973floating;
the January 1975 average daily
ratewas 2.5268
Note An international comparison ofcertain basic statistics is given in an annex table.
OECD ECONOMIC SURVEYS
A RC HIVE8-
RÉFÉRENCES
- DOCUMENT *»RÊTiif -
RETOUR BUREAU 610
SWITZERLAND
ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
The Organisation jor Economic Co-operation and
Development (OECD) was set up under a Convention
signed in Paris on 14th December, 1960, which provides
that the OECD shall promote policies designed:
to achieve the highest sustainable economic growth
and employment and a rising standard of living in
Member countries, while maintaining financial sta¬
bility, and thus to contribute to the development of
the world economy;
to contribute to sound economic expansion in
Member as well as non-member countries in the
process of economic development;
to contribute to the expansion of world trade on a
multilateral, non-discriminatory basis in accord¬
ance with international obligations.
The Members of OECD are Australia, Austria,
Belgium, Canada, Denmark, Finland. France, the Federal
RepublicofGermany, Greece, Iceland,Ireland,Italy, Japan,
Luxembourg, the Netherlands, New Zealand, Norway, Por¬
tugal, Spain, Sweden, Switzerland, Turkey, the United
Kingdom and the United States.
The Socialist Federal Republic of Yugoslavia is
associated in certain work of the OECD, particularly that
of the Economic and Development Review Committee.
The annual review of Switzerland
bytheOECDEconomicandDevelopmentReviewCommittee
took place on 30th January, 1975
The present Survey has been updated subsequently.
© Organisationfor Economic Co-operation and Development, 1975.
Queries concerning permissions or translation rights should be
addressed to :
Director ofInformation OECD
2. rue André-Pascal, 75775 PARIS CEDEX 16, France
TABLE OF CONTENTS
Introduction
I Recent trends 6
1 Weakening ofdemandpressure and appreciable slowdowninactivity 6
2 Persistenceofinflationarypressures 15
3 ResilienceofthecurrentbalanceandappreciationoftheSwissfranc 24
II Broad lines of economic policy 32
Demand management policy 32
Monetary policy 33
Budgetary policy 39
Policyofprice and income surveillance 42
Energy policy 43
HI Prospect for 1975 and economic policy conclusions 44
TABLES
Text
1 Demand and output 7
2 Indicators ofhouseholds' consumption expenditure 9
3 Indicators ofconstruction activity 10
4 Indicators ofinvestment inmachinery and plant 11
5 Population, employment, labour market 14
6 Pricetrends in Switzerland and abroad 15
7 Trend ofprices 16
8 Components ofthe rise inconsumerprices 21
9 Wage rates in industry and construction 22
10 Components ofindustrial wage growth 22
11 Structural comparisons :
(a) Current balances 27
(b) Energy consumption in 1973 27
12 Foreign trade bycommodity groups 28
13 Exports by geographical markets 29
14 Balance ofpayments "*30
15 Money supply and counterparts 38
16 Budgets ofcentral government and local authorities 40
17 Confederationbudget, economic classification 43
18 Prospects for 1975 45
Statistical Annex:
A National productand expenditure in current prices 53
B National product and expenditure at 1958 prices 54
\
OECDEconomicSurveys
C Income and expenditure ofhouseholds and privatenon-profit institutions 55
D Gross domesticproduct atfactor costby industrial origin 56
E Construction at 1958 prices 56
F Interest rates and capital markets 57
G Current government transactions 58
H Foreign trade by area 59
I Foreign trade by commodity groups 60
J Balance ofpayments 61
K Public expenditure by function 62 and 63
DIAGRAMS
1 Indicators ofdemand pressure 8
2 Components ofaggregate demand 12
3 Business surveys in manufacturingindustry 13
4 Consumer prices and wholesaleprices 17
5 Indicators linked withthe trend offood prices 18
6 Importprices, wholesale prices and retail prices ofenergyproducts 20
7 Demand pressure, prices and wages 21
8 Relative prices 23
9 Importprices and exchange rate changes 25
10 Terms oftrade and effective rates ofexchange 26
II Effective rates ofexchange 31
12 Interestrates 35
13 Capital market 36
14 Monetaryindicators 37
INTRODUCTION
In 1974 Switzerland, like most Member countries, entered a phase ofeconomic
adjustment characterised by some restructuring ofdemand and the beginnings ofa
reorganisation ofproduction. This was partly attributable to the consequences of
the rise in the price ofoil and in prices ofa number ofimported commodities, but
was also an outcome of the demand management policy introduced by the Swiss
authorities. Persistence of strong inflationary pressure caused the authorities to
maintain a restrictive stance in their policy. Autonomous deflationary factors and
the maintenance ofa restrictive policy brought about a significant weakening ofthe
demand pressure, amarked slowdown in activity andaneasingofthelabourmarket.
Strong inflationary pressure did admittedly continue throughout the year, but the
trend ofprices, and particularly ofwages, proved to be more moderatethan might
have been feared atthe end of 1973. Switzerland's performance inthis respect was
somewhatless unsatisfactorythanthose ofmost other Member countries. Another
aspect ofthe recent short-term trend is that, in spite of the considerable apprecia¬
tion ofthe Swiss franc, export growth was relatively sustained, at least during the
first half ofthe year, whilst weaker domestic demand caused imports to decline
in real terms. In all, the deterioration ofthecurrentbalancewassmallbycompar¬
ison with most other Member countries.
As mentioned earlier, the fight against inflation continued to be the primary
objective ofeconomicpolicy in 1974. Because ofvarious constraintswhich,inpar¬
ticular, prevented a more active use ofbudget policy, it was essentially by means of
monetary and financial instruments that the authorities moderated the growth of
aggregate demand and attempted to relieve inflationary pressure. It should be
notedthatdemandmanagementpolicywasalwaysappliedveryflexibly. Theautho¬
ritieswerealsoledtotakeanumberofmeasureslateintheyeartodiscourageinflows
offoreign capital andthuspreventanexcessiveappreciation oftheSwissfrancwhich
would undoubtedly compromise the balance on current transactions and give rise
to serious sectoral difficulties. The short-term outlook is still clouded by many
elements of uncertainty and, were economic policy to remain unchanged, activity
might recede slightly in 1975. The authorities have therefore already announced
thattheymightrelaxdemandmanagementpolicyiftheneedforthiswereto become
apparent.
PartI ofthe Survey, which dealswithdevelopments in 1974, analysesthecauses
ofthe weaker trend in domestic demand and production, together with the reasons
for the continuance of strong inflationary pressure; the trend of foreign trade and
paymentsisalsodiscussedinthispart. The broadlinesofeconomicpolicy(demand
management policy and energy policy) are reviewed in Part II. In Part III the
short-term prospects are discussed and certain economic policy conclusions put
forward.
OECDEconomicSurveys
I RECENT TRENDS
Weakening ofdemandpressure and appreciable slowdown in activity
The slowdown in aggregate demand, which began to be apparentin themiddle
of 1973, became significantly more pronounced in 1974 and was accompanied by a
shift fromdomesticto foreign demand. The decidedlymore restrictive stance given
to demand management policy since the end of 19721 has caused an appreciable
slowingofdomesticdemandgrowthandnotablyamuchweakertrendinhouseholds'
demand, whichhas affectedresidential constructioninparticular. Foreigndemand,
on the other hand, has continued to exert a considerable stimulus to the economy,
although the impetus imparted by the buoyant growth ofmerchandise exports was
partly offset by the generally unsatisfactory trend in exports of services and even
diminished appreciably in the second halfofthe year. In all, according to the esti¬
mates ofthe forecasting group ofthe Federal administration, which are still provi¬
sional, the growth ofGNPinreal terms expressedasanannualaveragesloweddown
sharply from about 3.5 per cent in 1973 to about nil in 19742, thereby causingthe
emergenceofsomeidleproductivepotential3. Theyearlyaverageconcealscontrasted
movements over the year, however. For instance, it is probable that activity was
already levelling offinthe firsthalfof 1974, notably because ofthe downturninthe
construction sector, and that in the second halfGNPeven decreased slightly in real
terms owing to the marked slowdown in industrial production growth. Aggregate
demand pressure has therefore lessened significantly since the middle of 1973;
production bottlenecks have steadily eased in all industries and the construction
market is no longer overheated. The labour market, which had been under
considerable strain during the previous two years, also began to be easier in 1974.
With the statistics available it is not possible to assess accurately the trend of
households' consumption within the year. The parallel movements of a number
of indicators (see Table 2) suggest, however, that the slowdown already observed
in 1973 became much more pronounced in 1974 and that from purchases
of goods, especially consumer durables, it progressively extended to demand
for services. This is hardly surprising in view of the very small growth in
households' real disposable income since the end of 1973. Given the fall in
numbers employed and the rapid rise in prices, since the fourth quarter of 1973
the real wage bill increased only very slightly in industry and even declined
significantly in the construction sector. Furthermore, households' incomes were
affected by the automatic increase in direct taxation ("progression à froid").
In all, according to official estimates that are as yet provisional, consumption
1 Short-termpolicyisanalysedindetailinPartIIofthissurvey.
2 It should beremembered that in Switzerland's casenational accountingestimates mustbe
interpreted with particular caution. Prior to 1970 already, there were no accounts on anoutput
basis. Since 1970,accountingon an income basishas been discontinued and all that is available
nowisanestimateofGNPonthebasisofthemaincomponentsofdemand.
3 EstimatesmadebytheSecretariatsuggestthatovertheperiodfrom 1968to1973thepoten¬
tialrateofGNPgrowthwasabout3.6percentayear. Assumingthatduringthatperiodpotential
employmentwasvirtuallythesameasactualemployment, potentialproductivitygrowthinSwitzer¬
land would thus have been a little under 3 per cent during the last four years. For purposes of
comparison,asemi-officialestimatemadebyK.SchiltknechtfortheEconomicResearchCommission,
putsthepotentialincreaseinproductivityat2.8percentayearfortheperiod1951-1958. According
toanotherestimate, based onanunpublished seriesforthe Swisscapital stock,theannualincrease
in productivity per hour worked was 3.2 per cent from 1952 to 1968 (see J. C. Ardenti and
J. P. Reichenbach, " Estimation delaFonction deProduction CESpourlaSuisse", Revue Suisse
d'Économie Politique et de Statistiques, December 1972). For further particulars ofthe method
used by the Secretariat to estimate Switzerland's productive potential see " The Measurement of
DomesticCyclicalFluctuations",OECDOccasionalStudies,July1973.
Switzerland
Table 1 DemandandOutput
197:1 AnnualpercentagechangfiIn
at current price» volume'
SF Share 1970 1971 1972 1973 1974»
million I960
Privateconsumption 73880 57.1 4.7 5.5 5.7 3.9 2.0
Publicconsumption 14935 11.5 4.7 3.7 4.5 4.1 2.5
Grossfixedassetformation 36145 27.9 6.1 7.8 7.7 -0.2 -7.5
Construction 24880 19.2 5.3 8.4 10.2 -0.3 -12.0
Machineryandequipment 11265 8.7 7.9 6.6 3.0 -0.1 2.5
Final domesticdemand 124960 96.6 5.1 5.9 6.2 2.7 -0.7
Stockbuilding3 1400 1.1 -0.6 0.3 -0.5
Exportsofgoodsandservices
(includingfactorincomes) 47590 36.8 7.6 3.7 5.7 7.1 3.9
Importsofgoodsandservices
(includingfactorincomes) 44580 34.5 9.1 6.9 6.5 5.6 0.3
Foreignbalance3 3010 2.3 -1.3 -0.3 0.7 1.3
GrossNational Product 129370 100.0 4.3 3.9 5.8 3.5 0.2
GNPimplicitpricedeflator 9.1 8.9 7.6 7.6
Industrialproduction 5.5 2.1 2.1 5.4 5.2*
Productivityinindustry 4.0 2.4 3.7 6.4
Aggregateproductivity* 2.7 3.0 5.1 3.1
1 Atpreviousyear'sprices.
2 OfficialprovisionalestimatesmadeatthebeginningorDecember.
3 ChangesexpressedasapercentageofGNPinthepreviousperiod.
4 GDPperdependentworker.
5 Firstninemonthsof1974oncorrespondingperiodofpreviousyear.
Sources:La VieEconomique;officialestimates.
by households increased in real terms by about 2 per cent as an annual average in
1974 although it is possible that this figure somewhat overstates the real trend*.
Gross fixed asset formation, which had already weakened significantly in 1973,
probably showed an appreciable downturn in 1974. Built into this overall trend,
however, are contrasting movements in individual categories. The decline in the
construction sector, which began in 1973, grew much more pronounced in 1974,
but there was some recovery in investment by enterprises in plant and equipment.
Furthermore, according to estimates by the national experts, which admittedly are
very uncertain, stock-building in volume terms in 1974 was significantly less than
in 1973, notably because of the difficulty of obtaining short-term credit for this
purpose.
The steep decline in demand in the construction sector related essentially to
investmentinhousingand civilengineeringprojects, whichwereparticularlyaffected
by scarcer and dearer credit5, cutbacks in spending by local authorities and, to a
lesser degree, by direct controls on building8. In the first half of 1974 the number
4 Inviewoftheverysmallgrowthofdisposableincome,thisestimateseemstoimplyadecrease
in the saving ratio ofhouseholds. Yet, although no information is available on thebehaviourof
households in this regard, certain factors may have led them to maintain or even increase their
propensitytosave. There was an increasing tendency on the part of banks to ask households
toamortizetheirmortgageloansprogressively. Thedeteriorationoftherealvalueoftheirfinancial
assets, asaresult ofthecontinuingrapid upwardmovement ofpricesand thedeclinein thevalue
ofsecurities, may have prompted households to save more in order to maintain the real value of
their holdings.
5 Banks had difficultyin financingconstructionloans, since theresources theycould usefor
thispurpose,chieflysavingdepositsandcashcertificates,increasedonlyslightlyin1974. Moreover,
even when they wereable tofind thenecessary resources, theirlending operations were limited by
thequantitativecreditrestrictionsimposedbytheauthorities.
6 Inordertostabilisetheconstructionmarket, partial bansondemolitionand building were
imposed by federal order of 25th June, 1971. These were reinforced by further legislation on
Setpage8 >
OECDEconomicSurveys
Diagram 1 Indicators ofdemand pressure
Ratio
1.2 1.1
Déviationfromtrtndofindex
ofindustrialproduction
1.0
Parcant
M Judgtmtntonoutputcapacities
S^
M M
*0. N «I
20 20
0 0
Judgementonlabourbottlenecks
Thouwnds -20
3
Residentialconstructs Ratio
Gapbtiwnnparmitiissutdanddwelling*conitructatf
(hittot»)
4-quartermovingaverages 0.1
/
H °2
-I û.i
0.4
Proportionofdwellingsvacant
(rightscs/t)
0.5
Labourmarket
Ratioofjobofferstojobseekera
(parctntchangesfrompreviousyear) 0.6
\
Parcant
1HI 1H9 1170 1J71 1J72 1)73 U74
Sources: IWETH, Berichte der Konjunkturforschungsstelle, La Vie Economique and OECD
Main Economic Indicators.
Endofnote6.
20thDecember, 1972,whichextendedthemtocoverthewholeofthenationalterritoryand a larger
numberofbuildingcategories. Adjustmentsweremadesubsequently; however,inSeptember 1973,
634Communeslocatedforthemostpartin mountainareasandaccountingfornomorethan5per
cent of the total resident population were exempted from the prohibitions. Generally speaking,
the authorities have sought not to hold up the construction oflow- or medium-cost housing and
priorityinfrastructure projects in the public and private sectors. By and large, thecontrols seem
tohaveaffectedtheurbancentresmorethan theruralcommunes. InNovember1974the ban on
demolitionandconstructionwasentirelyliftedwitheffectfrom1stJanuary, 1975.
