Switzerland 1986-1987.

90 Pages·1987·5.526 MB·English

by  OECD

OECD
ECONOMIC SURVEYS
1986/1987
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SWITZERLAND
FEBRUARY 1987
ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
Pursuanttoarticle I oftheConventionsignedinParison 14thDecember,
1960,andwhichcameintoforceon30thSeptember, 1961,theOrganisation
for Economic Co-operation and Development (OECD) shall promote
policiesdesigned:
- toachievethe highestsustainableeconomicgrowthandemployment
andarisingstandardoflivinginMembercountries,whilemaintaining
financial stability, and thus tocontribute to thedevelopment ofthe
worldeconomy;
- to contribute to sound economic expansion in Member as well as
non-membercountries in the processofeconomicdevelopment; and
- to contribute to the expansion of world trade on a multilateral,
non-discriminatory basis in accordance with international obliga¬
tions.
The original Member countries of the OECD arc Austria, Belgium,
Canada, Denmark, France, the Federal Republic of Germany, Greece,
Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal,
Spain,Sweden,Switzerland,Turkey, the United Kingdomand the United
States. The following countries became Members subsequently through
accessionatthedatesindicatedhereafter:Japan(28thApril, 1964),Finland
(28thJanuary, 1969), Australia (7thJune, 1971) and New Zealand
(29th May, 1973).
The Socialist Federal RepublicofYugoslavia takes part in someofthe
workofthe OECD (agreement of28thOctober, 1961).
Publiéégalement en français.
©OECD, 1987
Application for permission toreproduce ortranslate
all orpart ofthis publicationshould be made to:
Head ofPublicationsService,OECD
2, rue André-Pascal, 75775 PARIS CEDEX 16, France.
CONTENTS
Introduction 7
I. Recent trends 8
Demand and output 8
The labour market 10
Prices, wages and incomes 13
Foreign trade and balance ofpayments 19
Medium-term export performance 27
II. Economic policy 32
Monetary policy 32
Fiscal policy and public finance 38
III. Short-term forecasts 43
IV. Structural aspects offinancial markets 46
Introduction and overview 46
The structure of the Swiss financial system 49
The international competitiveness ofthe banking system 54
Patterns ofdomestic intermediation 55
Problems in enterprise financing 58
The efficiency of intermediation 60
Monetary policy, supervision, and the ultimo problem 62
Recent policy developments 64
V. Conclusions 65
Notes and references 68-70
Annex: Calendar ofmain economic events 71
Statistical annex 76
TABLES
Text
1. Demand and output 9
2. Indicators ofprivate consumption 10
3. Indicators of investment 1 1
4. Employment, labour market 12
5. Trend ofprices 15
6. Adjustment of real wage earnings 18
7. Breakdown ofchanges in the real labour cost gap 18
8. Foreign trade by commodity group 20
9. Exports by geographical market 21
10. Balance ofpayments 26
11. Constant market share analysis 28
12. International standard industrial classification 28
13. Target and actual growth rates of Ml and the adjusted monetary base 33
14. Monetary aggregates 36
15. Nominal and real interest rates in some OECD countries 37
16. Central government budget 39
17. General government account 40
18. Financial plan of the Confederation for 1988-1990 41
19. Short-term forecasts 44
20. Value added and employment shares in the financial sector 48
21. Banking system: origin and destination of funds (1985) 49
22. The structure of the Swiss banking system 51
23. Stamp duty receipts as percentage of federal government revenue 52
24. Issues ofinternational bonds 53
25. Switzerland's share in international banking 54
26. Debt equity ratios, non-financial enterprises 58
27. Issue ofshares and securities as a percentage ofgross fixed capital formation 59
28. Indicators ofcost efficiency and profitability in the banking sector 60
Statistical annex
Selected background statistics
A. Gross national product (at current prices) 77
B. Gross national product (at 1970 prices) 78
C. Wholesale prices 79
D. Money supply 80
E. Interest rates and capital markets 80
F. Foreign trade by area 81
G. Foreign trade by commodity group 82
H. Balance of payments 83
DIAGRAMS
Text
1. Prices, wages, cost 14
2. International comparison ofconsumer prices 16
3. Contribution to change in total supply deflator 17
4. Interest rate differentials and exchange rates vis-à-vis the United States and
Germany 22
5. Exchange rate ofthe Swiss Franc 23
6. International comparison of unit labour costs in manufacturing 24
7. Effect of product composition on export growth 30
8. Interest rates 34
9. Indicators of activity 45
10. Savings, investment and net exports of capital 47
11. Banking assets and liabilities by sector 57
12. Market shares in the banking sector 62
13. End-of-month interbank overnight rate 63
BASIC STATISTIC OF SWITZERLAND
THELAND
Area (1 000sq.km.) 41.3 Majorcities, 1985estimates
Cultivatedland,grasslandandpastures (I 000inhabitants):
(I 000sq.km.,in 1972) 20.2 Zurich 355.4
Forest(1 000sq.km.,in 1972) 10.5 Basle 176.4
Geneva 162.6
Bern 140.4
THEPEOPLE
Population, 1985average,estimates(1 000) 6533 Numberofforeign workers(1 000):
No.ofpersonspersq.km.! 158 December 1985 716.1
Netannualrateofpopulationincrease Annualaverageincreaseinthenumberofforeign
(per 1 000inhabitants,average 1982-1985) 4 workerscensus(I 000):
Civilianemployment, 1985 (I 000) 3 171 1962-1972 16.8
Percentagedistribution: 1973-1985 -14.4
Agriculture 6.6
Industryandconstruction 37.7
Otheractivities 55.7
PRODUCTION
Grossnationalproductin 1985(billionSwissfrancs) 241.5 Valueaddedbyoriginin 1975(inpercentofGDP
GrowthofrealGNP, 1982-1985average(annual atfactorcost):
rale,percent) 1.8 Agriculture 4.6
Grossfixedinvestmentin 1985(inpercentofGNP) 22.5 Industry 29.8
Growthofrealinvestment, 1982-1985average Construction 6.2
(annual rale,percent) ..2.9 Services . 59.4
THEGOVERNMENT'
Publicconsumptionin 1985(inpercent CompositionofParliament(percent):
ofGNP) 12.5 National State
Revenuein 1985(inpercentofGNP) 25.4 Council Council
Publicdebtinpercentofcurrent
receipts(1985)2 131.9 Christian Democrats 21.0 39.1
Radical Democrats 27.0 30.4
Socialists 23.5 13.0
CentralDemocraticUnion 11.5 10.9
Other 17.0 6.5
Lastelections: 1983
Nextelections: 1987
FOREIGNTRADE
Exportsofgoodsandservicesasapercentage Importsofgoodsandservicesasapercentage
ofGNP(average 1982-1985) 35.0 ofGNP(average 1982-1985) 34.9
Commodityexports(fob,millionUSdollars, 1985) 27 116 Commodityimports(cif,million USdollars, 1985) 30438
Percentagedistribution: Percentagedistribution:
Byarea in 1985: Byareain 1985:
ToOECDcountries 76.8 FromOECDcountries 87.8
ToEECcountries 52.6 FromEECcountries 70.7
ToOPECcountries 5.9 FromOPECcountries 3.2
BySITCgroupsin 1985: BySITCgroupsin 1985:
Food,drinksandtobacco(SITCsections0and I) 3.2 Food,drinksandtobacco(SITCsections0and 1) 7.6
Rawmaterials(2,3,4) 1.8 Rawmaterials(2,3,4) 13.6
Semi-finishedgoodsandchemicals(5and6) 42.0 Semi-finishedgoodsandchemicals(5and6) 33.2
Finishedmanufacturedgoods(7,8,9) 53.0 Finishedmanufacturedgoods(7,8,9) 45.6
THECURRENCY
Monetaryunit:Swissfranc CurrencyunitperU.S.$,averageofdailyfigures:
Year 1985 2.4574
November 1986 1.6853
1. Confederation,CantonsandCommunes.
2. ConsolidateddebtoftheConfederation.
Note:Aninternationalcomparisonofcertainbasicstatisticsisgiveninanannextable.
ThisSurveyisbasedontheSecretariat'sstudypreparedfor
theannualreviewofSwitzerlandbytheEconomicandDevelop¬
ment Review Committeeon 11th December 1986.
Afterrevisionsinthelightofdiscussionsduringthereview,
final approval ofthe Surveyfor publication was given by the
Committeeon 7th January 1987.
INTRODUCTION
In 1986, theSwisseconomycontinued to growthough thepeakofthepresent recovery
wasprobablyreachedin 1985. Incontrasttoearliercycles,thegrowthofactivityin thefirst
two years ofthe upswing had been led by domestic demand. In 1985 exports took over the
leadingrole,withtheforeignbalancecontributingsubstantially(VUpercentagepoint) tothe
growthofGDP. In 1986,domesticdemandgrewconsiderablyfasterthanGDPandasimilar,
thoughweaker,developmentisexpectedin 1987. In 1985,employmentroseforthefirsttime
since 1981 andthealreadylowrateofunemploymentdeclinedfurther. Helpedbythefalling
dollarexchangerate,anddecliningoil andnon-oil commodity prices, inflationsloweddown.
In 1986, price levels actually declined.
In recent years, growth of the money supply has been tightly controlled, which
contributed to the favourable inflation performance and laid the base for further non-
inflationarygrowth.Highertaxrevenuesboostedbybuoyantactivityandcontinueddiscipline
in government spending arelikely to result in a small surplus in central as well as general
government budgets in 1986.
Netexportsweakenedfrommid-1985,butduetotheterms-of-tradeimpactofthefranc
appreciation and the fall in oil and other commodity prices, domestic demand has again
becomethemainstayoftheexpansion.Asaconsequence,importgrowthhasacceleratedand
therealforeignbalanceislikelytodeteriorate. ButduetotheJ-curveeffect,thedeficitinthe
trade balance may actually shrink in 1986. Thanks to a positive balance on invisibles and
lowercommodityprices,thecurrentaccountsurplushasincreasedtomorethan5 percentof
GDP in 1985 and 1986.
Medium-termanalysissuggeststhatthestrength oftheSwissfrancexchangerate may
not leave unaffected the performance ofthe exposed sector in spite ofrelatively favourable
cost developments. On the other hand, the invisibles surplus may continue to increase and
morethancompensateforthetradedeficit.Thesurpluson invisiblesstemstoa considerable
extent from the international activities of the Swiss financial sector. The integration of
international financial markets, deregulation and the development of new technologies and
financial instruments areposing adjustment challenges toSwiss financial institutions which
they have tried to meet through diversification and by widening activities abroad. Recent
changesinlegislationindicatethattheSwissauthoritiesareawareoftheneedtoadjusttothe
changing international environment in banking.
Current economic trends are reviewed in Part I ofthe present Draft Survey. This part
also contains an analysis of Switzerland's export performance over the last two decades.
Part IIpresentsanoverviewoftheconductofmonetarypolicysincetheadoptionofthemoney
supply targeting approach. The section alsooutlines the Swiss approach to fiscal policy, the
resultsachievedinrecentyearsandtheoutlookfortheyearstocome.Short-termforecastsare
presented in Part III. Part IV discusses in some detail the structure of the Swiss financial
system,itsoperationalefficiencyanditsroleinchanginginternationalfinancialmarkets.The
policy conclusions are presented in Part V.
I. RECENTTRENDS
Demand and output
In 1985, the third year of the present economic recovery, the growth of real gross
domesticproductmorethandoubledtoanannualaveragerateof4percent;amongWestern
EuropeancountriesthisperformancewasbetteredonlybyNorway.Thestrengthofeconomic
activityowedmuchtonetexports,notablyinthefirsthalfoftheyear. Fromthesecondhalfof
1985onwards,however,demandshiftedfromexternaltowardsdomesticsourcesdueinpartto
the appreciation of the Swiss franc (Table 1). Recent indicators suggest that the cyclical
recoveryreacheditspeakin 1985. Inthefirsthalfof1986,growthofrealGDPdeceleratedto
a seasonally adjusted annual rate of 1.8 per cent, with a marked dropin activity in thefirst
quarter.Thelatterwastoalargeextenttrieresultofafallinrealexportsofgoodsandservices
which mainly mirrored the weakness ofdemand in major trading partner countries. In line
withtotaldemand,thegrowthofindustrialproductionacceleratedtoanaverageannual rate
of 5 per cent in 1985. But, as a result of the sharp fall experienced in 1981/82, industrial
production regained its 1980 level only by mid-1985.
In contrast to the vigorous expansion of real GDP and the concomitant increase in
employmentandhouseholds' realdisposableincomes,privateconsumptiongrowth remained
relativelysubdued in 1985, implying an increasein the household savings ratio. Among the
reasonsfortherelativelysluggishresponseofprivateconsumptionmightbecitedtheabsence
ofamarkeddeclineinconsumptionintheprecedingrecessionandspecialinfluences,suchas
the expected compulsory introduction ofcatalyst converters for automobiles and, possibly,
anxiety about the employment outlook, despite relatively low unemployment levels.
Consequent upon the stronger rise in real incomes due to the realised terms-of-trade gains,
private consumption accelerated in the first half of 1986, growing faster than GDP, thus
taking the long-awaited lead in total demand. Notably, sales ofconsumer durables, which
wereparticularlyweakin 1985,gainedmomentumasindicatedbystatisticsofretailsalesand
new car registrations (Table2).
Policyeffortstocontainpublicsectordeficitsandtoreduceoratleaststabilizetheshare
of public expenditures in GDP exerted an overall damping effect on demand in 1985.
However, certain defence expenditures were advanced which propped up government
consumption in 1985. Increased employment by cantonal and local authorities more than
compensated the recruitment stop of the Confederation with the result that government
consumptioninreal termsaccelerated from 1.2percentin 1984to2.3 percentin 1985. But,
asaconsequenceoftheearlieradvancementofexpenditures,publicconsumptiondecelerated
somewhat in the first halfof 1986.
Real gross fixed capital formation remained strong in 1985, for the third consecutive
year,andcontinueditsfavourableperformanceintothefirsthalfof1986.Themainstayofthe
expansionwasinvestmentin machineryandequipmentwhichgrew by 10.4percentin 1985
and 16.3 per cent in thefirst halfof 1986. Efforts to enhance international competitiveness
through modernisation and capital deepening, but also capital widening investment,
Table 1. Demand andoutput
1984atcurrentprices Percentagechange,volume'frompreviousperiod,annualrates,s.a.
SFmillion Percentageshare Average 1984 1985 1984 1985 1986
ofGNP 1981-83 II I II 1
Privateconsumption 133610 59.1 0.7 1.5 1.5 2.5 -0.1 4.3 2.8
Publicconsumption 28925 12.8 2.4 1.2 2.3 -0.7 3.5 1.7 1.1
Grossfixed asset formation 49800 22.0 1.3 4.2 5.7 7.3 3.4 7.5 4.5
Construction 34200 15.1 1.8 4.1 2.9 5.2 -1.0 8.1 -2.4
Machineryandequipment 15600 6.9 0.4 4.3 10.4 11.1 11.2 6.6 16.3
Finaldomesticdemand 212335 93.9 1.0 2.2 2.7 3.4 1.3 4.8 3.1
Change in stocks23 1500 0.7 -1.0 0.1 -0.1 -3.3 1.2 -0.6 2.4
Exportsofgoods andservices 80550 35.6 0.8 6.4 8.3 9.0 9.6 5.5 1.9
Importsofgoodsandservices 81 155 35.9 0.1 7.1 5.0 4.8 3.5 8.1 9.3
Changein foreign balance2 -605 -0.3 0.3 -0.6 1.3 1.6 2.6 -1.4 -3.8
Grossdomesticproduct 213230 94.3 0.3 1.8 4.0 1.7 5.2 2.9 1.8
Grossnational product 226060 100 0.8 3.1 4.0
GDPdeflator _ _ 5.8 2.8 2.7 1.4 2.8 3.4 3.8
Privateconsumptiondeflator - - 4.8 3.3 3.6 2.0 5.7 1.1 0.7
Indexofindustrial production - - -2.0 3.6 5.0 2.5 5.5 5.7 0.6
1. At1970price.
2. AsapercentageofGDPofthepreviousperiod.
3. Thisitemispartlyaresidualvalue;italsocontainsstatisticalerrorsandomissionsanddoesnotreflectstockbuitdingfully.
Sourer. FederalDepartmentofthePublicEconomy,Lavieéconomique:FederalStatisticsOffice,Refletsdel'économie.