The recovery of Swiss exports in 2015 is likely to be too modest to offset the loss of momentum in domestic economic activity. Accordingly, the Credit Suisse economists now expect economic growth to slow to 1.6% from 1.8% in 2014. In view of the sluggish growth momentum, there is unlikely to be any change in unemployment or the level of prices in the coming year. That means the Swiss National Bank is likely to maintain its EUR/CHF exchange rate floor of 1.20 and therefore keep interest rates low for longer still.

Energy Reform: Incentive Taxes Would Promise Greater Success
The aims of the federal government's "Energy Strategy 2050" are in many respects problematic and contradictory, according to the Credit Suisse economists' assessment. Thus any withdrawal from nuclear energy and expansion of renewable energies, which are subject to major volatility, are likely to have negative effects on supply in terms of stability and flexibility. This is extremely problematic without the close links to other countries that would enable potential supply gaps to be filled. At the same time, the strategy aims to achieve electricity production that depends as little as possible on other countries. However, this overlooks the fact that Switzerland is by no means self-sufficient in terms of electricity production: Energy trading with other countries is not only necessary for guaranteeing the security of supply and probably the most important prerequisite for a successful exit from nuclear power, but also generates a significant benefit for the Swiss electricity industry and overall economy. There are also a number of obstacles to the expansion of renewable energies in Switzerland. Low electricity prices on the European market are currently rendering investments in Switzerland uneconomical. However, this specifically applies to areas in which the strategy envisages an expansion of supply, primarily large-scale hydroelectric plants. Investment in renewable energies also partially conflicts with the interests of nature, landscape, and monument protection.

The Credit Suisse economists also believe it is extremely debatable whether the ambitious targets on reducing energy consumption – a further objective of the "Energy Strategy 2050" – can be achieved without restrictions and changes in behavior. The economists believe incentive taxes are a significantly more expedient way to trigger behavioral effects in terms of consumption and innovations in energy production than a subsidy-based promotion system. Replacement of the current promotion system with a system of incentives would accordingly be a step in the right direction.

Swiss-EU Relations at a Crossroads
In an analysis of the possible decision options, the Credit Suisse economists show in the current issue of "Monitor Switzerland" how negotiations between Switzerland and the EU could develop by the end of the transitional period in 2017. According to the economists, Switzerland and the EU are heading for a situation in which Switzerland breaches the bilateral agreements due to the introduction of modest immigration quotas, but neither Switzerland nor the EU is likely to terminate these agreements. The resulting uncertainty and possible selective measures the EU could take against Switzerland, such as the implementation of value added tax or customs declarations, is likely above all to harm the Swiss economy given the proportions.

Density of Physicians: "Rösti Divide" in Healthcare
Using a model developed in-house, the Credit Suisse economists also explore regional differences in the density of physicians in terms of both specialist consultants and general practitioners (GPs). Specifically, they capture the demand and supply of each municipality within a radius of 30 minutes by car from the center of the municipality. It is clear that specialist consultants are primarily concentrated in the larger urban centers. Only around 28% of the population but 61% of all jobs at specialist practices can be found in municipalities with more than 20,000 inhabitants. There is also a striking difference between German and French-speaking Switzerland. The latter has an above-average density of physicians, above all due to the high number of specialist consultants in relation to demand in the cities of Geneva and Lausanne. This is also well above average compared to Zurich and Basel. The situation with GPs is exactly the opposite. Although there is also a higher density of GPs in urban centers than in rural municipalities, this is less marked than is the case with specialist consultants. Thus around 41% of all jobs at GP practices are to be found in municipalities with more than 20,000 inhabitants (with 28% of the entire population). There are once again striking differences between German and French-speaking Switzerland but of the opposite kind, with a significantly lower density of GPs in French-speaking Switzerland than in German-speaking Switzerland. It can be assumed that there is more basic healthcare provision at specialist practices and hospitals in French-speaking Switzerland.

Different Aspects of the Economy in One Publication
The current issue of "Monitor Switzerland" also includes an overview of prospects for the global economy, comments on the Swiss National Bank's monetary policy, and identifies the most attractive places to retire from a tax perspective. Appenzell Innerrhoden, Uri, and Schaffhausen charge a particularly low tax rate on the withdrawal of capital from pension fund assets, while Fribourg, Vaud, and Zurich are the most unattractive places to retire given their substantial tax on pension fund asset withdrawals. "Monitor Switzerland" is rounded off by an analysis of the significance of the construction industry and the solidity of government finances.

"Monitor Switzerland" is published quarterly. The next issue will be published on March 17, 2015.