Infocus - Swiss retirement

IS THE SWISS RETIREMENT AGE STILL APPROPRIATE?

The Swiss economy is recovering from the Covid pandemic and inflation has returned to the range required for price stability. However, the Swiss National Bank has insisted that it is too early to consider any tightening of monetary policy. In the light of that, GianLuigi Mandruzzato uses this edition of Infocus to examine the proposed Swiss pension reform.

The Swiss economic outlook has improved

The Swiss economy has strengthened since March as the measures against the pandemic have been eased (see Figure 1a). The GDP contraction in Q1 is now behind us and survey data point to a strong rebound in Q2. The service sector PMI rose to its highest level since 2018, closing the gap with the manufacturing sector (see Figure 1b). The Swiss National Bank (SNB) raised its 2021 GDP growth forecast to 3.5%, expecting GDP to rise above its pre-pandemic level during 2021.

Growth is driven by both domestic demand, as the reopening of the economy allows households to spend freely, and the external sector as international trade normalises. Exports no longer rely only on pharma and chemicals goods as exports of other sectors, including jewellery and machinery goods, have strengthened (see Figure 2).

Price pressures are moderate although headline and core inflation returned to the SNB’s 0-2% target range (see Figure 3). Inflation rose because of the base effects in the energy and travel-related sectors. This will moderate in the rest of 2021, leaving inflation on a low path and raising the risk that consumers’ expectations fall below the SNB’s inflation target.

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