Washington, June 24, 2024
The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation[1] with Switzerland.
Weak external demand and tighter financial conditions lowered growth to 0.8 percent in 2023. The labor market remained resilient, although the unemployment is slowly rising from a historic low. The external current account (CA) surplus declined in 2023, with lower merchanting trade and a lower services trade balance. Fiscal policy has eased while maintaining a surplus. Monetary policy, along with global disinflation, has successfully brought inflation back within the 0-2 percent price stability range. The state-facilitated acquisition of Credit Suisse by UBS in 2023 stabilized financial markets, with limited spillovers to the financial sector and to the economy.
Growth is expected to recover gradually to 1.3 percent (1 percent adjusted for sports events) in 2024 and 1.4 percent (1.7 percent adjusted for sports events) in 2025, but uncertainties remain. Inflation is projected to remain within the price stability range, at 1.5 percent on average in 2024. The current account is projected to remain broadly unchanged, reflecting a gradual recovery in external demand countered by the appreciated currency. Medium-term growth hovers around 1.5 percent but faces headwinds related to adverse demographics trends, skills gaps, and lower trading partner growth.
Risks are broadly balanced amid high uncertainty. In the short term, downside risks arise from intensification of regional conflicts and an abrupt global slowdown, which could result in slower growth and trigger safe haven flows. Downside risks may also arise from the ongoing integration of CS and UBS and the large size of the combined bank, calling for strong financial sector reforms. Over the medium-term, there are looming downside risks include from accelerated geoeconomic fragmentation and possible setbacks in strengthening EU relations. Commitment to free trade and global cooperation, and efforts to expand trade relations can diversify supply chains while limiting trade disruptions.
Source – IMF