Switzerland: Navigating through uncertainty

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As a small, open economy, Switzerland has been highly exposed to recent global developments including swings in external demand, major changes in international trade policies and geopolitical uncertainty. The economy has weathered these shocks well: Inflation and unemployment are low and public finances are sound. But growth has been below trend since 2024, falling short of the annual average growth rate of 1.8% of the previous decade. Bolstering growth and resilience will hinge on building stronger ties with key trading partners, but also on forging new trade partnerships. This will lay the grounds for diffusing productivity growth beyond export-oriented sectors and firms.

by Priscilla Fialho and Adolfo Rodriguez-Vargas, OECD Economics Department

Strengthening ties with trading partners and expanding potential export markets

The Swiss economy is very open to international trade and its exports amount to 78% of GDP, compared with an OECD average of 30%. Major destinations for Swiss goods exports include the European Union, the United States, and China.

Switzerland’s European policy is based on bilateral sectoral agreements, given that the country is not a member of the European Union (EU). This has given it access to parts of the single market while maintaining a degree of discretion and autonomy for the adoption of EU law. Over the past 50 years, there have been more than 120 such bilateral deals. But maintaining single market access in the future will hinge on a more rigorous application of evolving EU rules and procedures. The new Swiss – European Union package of agreements is set to implement this and preserve single market access for Swiss firms. This will enhance the stability and predictability of Switzerland-EU relations, boost investment and expand cooperation into new areas such as electricity markets, improving energy affordability and ensuring reliable supply.

Upgrading the current free trade agreement with China could provide further opportunities. The existing agreement eliminated most tariffs for Swiss good exports, but some products like watches and pharmaceuticals still face significant tariffs. Switzerland could also gain from better conditions for services exports to China. Ratifying the recent EFTA agreements with MERCOSUR, Malaysia and Thailand, and pursuing efforts to update the terms of the agreement with Mexico, would also open new opportunities and spread risks. Closer ties with the United Kingdom, including the negotiated upgrade of the 2019 free trade agreement on 13 July 2026, are also welcome and the mutual recognition of financial supervisory arrangements can boost financial services trade between both countries. But such agreements can be very technical and not all of the opportunities that they entail are evident to firms. More could be done to explain how the private sector can harness existing Free Trade Agreements to diversify export markets and improve the resilience of Switzerland’s position in global value chains.

Boosting broad-based productivity growth

Switzerland’s productivity is among the highest in the OECD. However, productivity growth has not been homogeneous across all sectors and firms. In recent decades, it has been mostly driven by large, high-value-added, and export-oriented firms in the sector of pharmaceuticals. Increasing productivity spillovers from these firms to smaller and domestically oriented firms would lift overall productivity and improve the resilience of the economy to external shocks.

Access to high-quality and affordable telecommunications and energy, for example, would help boosting the performance of downstream firms in all sectors of the economy. Currently, only large users can freely choose their retail electricity or gas supplier or sell excess own-produced electricity to third parties. Regional monopolies continue to dominate retail electricity markets, which may well be a lost opportunity to achieve lower prices. Similarly, high state participation in the telecommunications sector weakens competition. In professional services like notaries or healthcare professionals, it is excessively tight cantonal regulations that hamper competition. Navigating the complex system of licenses and permits across different jurisdictions drives up the costs for firms, disproportionally affecting smaller businesses. Boosting competition in these sectors would help increase spillovers towards less productive sectors and firms. Concrete examples for policy action in services sectors include harnessing the new electricity agreement with the European Union to boost competition; separating the management, operations and accounting of large state-owned companies in telecommunications, and opening more ancillary operations to private participation. Implementing the silence-is-consent principle for licensing low-risk activities could also ease administrative burdens.

Labour shortages still affect many sectors of the Swiss economy, particularly in manufacturing and construction, where more than a quarter of firms report severe recruiting difficulties, and among smaller companies. Information and Communication Technologies specialists and scientific technicians are often hard to find, which may impair technology spillovers to less productive firms. More generally, enhancing skills could bring significant benefits for the wider diffusion of productivity gains in a skill-intensive economy like Switzerland. Ensuring appropriate provision of affordable childcare would allow more women to participate in the labour market and address skill gaps. Facilitating switches between academic and vocational tracks of education could ease these gaps in technical fields.

Although Switzerland ranks among the world’s most innovative countries, innovation activity has been slowing, particularly in smaller firms. Enhancing innovation support for SMEs can increase their engagement in R&D activities. Switzerland has instruments tailored to SMEs, like Innosuisse’s innovation cheques to fund preliminary studies and tests with external experts, but more could be done to make firms aware of these and similar opportunities.

References

OECD (2026), OECD Economic Surveys: Switzerland 2026, OECD Publishing, Paris, https://doi.org/10.1787/48b03aff-en.