No. 128, April

In March, the KOF Business Situation Indicator for the Swiss private sector fell for the fourth time in succession (see G 6). After only a slight decline of the indicator in the previous month, the negative trend has now intensified again. As a result, the business situation of companies is currently less favourable than at the same time last year. The Swiss economy is cooling down.  

Effectively taxing high-income businesses and workers is more difficult because of their global increase in mobility. According to a new study: Governments have consequently increased the income tax burden on the middle class. While, at the same time, the tax burden on top earners and businesses decreased.  

After the global financial crisis, lending to companies slowed down considerably in the eurozone. The European Central Bank chose unconventional measures to alleviate the situation. According to a current KOF study, small and medium-sized enterprises have benefited from the ECB’s quantitative easing – albeit to different degrees in different countries.

Although the Swiss economy went through a difficult phase in 2015 and 2016, real wages grew relatively substantially during this period, only to drop again in the subsequent two years. This development provides five key insights into wage setting in Switzerland.

KOF has lowered its GDP growth forecast for this year from 1.6% to 1%. This correction is due to the international framework conditions which have deteriorated further in the last few months. In line with the subdued economic outlook, KOF expects the Swiss economy to operate slightly below capacity in 2019.