IMF Executive Board Concludes 2024 Article IV Consultation with Switzerland
IMF News, June 24, 2024
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- Published: June 24, 2024
Overview
- The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation 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, 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.
Outlook and risks
- Growth projections:
- 2024: 1.3 percent (1 percent adjusted for sports events)
- 2025: 1.4 percent (1.7 percent adjusted for sports events)
- Medium-term growth: around 1.5 percent
- Inflation: projected to remain within the price stability range, at 1.5 percent on average in 2024.
- Current account: projected to remain broadly unchanged, reflecting a gradual recovery in external demand countered by the appreciated currency.
- Short-term downside risks:
- Intensification of regional conflicts and an abrupt global slowdown, which could result in slower growth and trigger safe haven flows.
- Risks from the ongoing integration of CS and UBS and the large size of the combined bank.
- Medium-term downside risks:
- Accelerated geoeconomic fragmentation.
- Possible setbacks in strengthening EU relations.
- Policy emphasis: Commitment to free trade and global cooperation, and efforts to expand trade relations can diversify supply chains while limiting trade disruptions.
Executive Board assessment and policy recommendations
- Directors agreed with the thrust of the staff appraisal and welcomed the Swiss economy’s strong fundamentals, resilience, and the envisaged gradual recovery.
- Fiscal policy:
- The debt brake rule has anchored fiscal policy well, allowing for a substantial reduction in public debt while incorporating adequate flexibility to address shocks.
- Current fiscal stance considered broadly appropriate.
- Importance of closing structural deficits for 2026–27 and developing a comprehensive medium‑term plan to address pressures related to aging, climate change, and defense.
- Welcome for the recent fiscal sustainability report as a basis for formulating policy proposals.
- Monetary policy:
- Directors commended the decisive actions of the Swiss National Bank (SNB) that have curbed inflation.
- The March rate cut was considered appropriate.
- Monetary policy should remain data‑dependent given uncertainty around the inflation outlook.
- Encouraged the SNB to gradually reduce its balance sheet while building buffers from retained earnings.
- Financial sector:
- Resilience of the financial sector was welcomed, but pockets of vulnerabilities were noted, particularly related to the real estate sector.
- Need for strong financial sector reforms, informed by lessons from the Credit Suisse crisis.
- Welcome for the authorities’ review of the too‑big‑to‑fail regime.
- Importance of enhancing the macroprudential toolkit to address real estate risks and closing data gaps.
- Welcome for efforts to strengthen the AML/CFT regime and anti‑corruption frameworks.
- Encouragement to implement the remaining recommendations from the 2019 Financial Sector Assessment Program (FSAP); the 2025 FSAP will provide updated recommendations.
- Structural policies:
- Ongoing skills gaps and demographic challenges require continued efforts to incentivize higher participation of women, older workers, and migrants, along with pension reforms.
- Recent progress on climate policy welcomed; additional efforts urged.
- Positive note on the resumption of negotiations with the EU on participation in the single market.
Financial stability and crisis lessons
- The state-facilitated acquisition of Credit Suisse by UBS in 2023 stabilized financial markets.
- Directors stressed the need for strong financial sector reforms given the large size of the combined bank.
- Continued vigilance recommended for real estate vulnerabilities.
- Strengthening the macroprudential toolkit, closing data gaps, and completing FSAP recommendations are important priorities.
Selected economic indicators, 2021–25
- Population (2023): 8.815 million
- Quota (February 2024; millions SDRs / % of total): 5,771.1 / 1.21%
- Key export markets in 2023: Euro area (46%), US (18%)
- Output
- Real GDP growth (%): 2021: 5.4; 2022: 2.7; 2023: 0.8; 2024: 1.3; 2025: 1.4
- Unemployment
- Unemployment (%): 2021: 3.0; 2022: 2.2; 2023: 2.0; 2024: 2.3; 2025: 2.4
- Prices
- Inflation (period average, %): 2021: 0.6; 2022: 2.8; 2023: 2.1; 2024: 1.5; 2025: 1.2
- General Government Finances
- Revenue (% GDP): 2021: 34.2; 2022: 33.1; 2023: 32.5; 2024: 32.4; 2025: (not listed)
- Expenditure (% GDP): 2021: 34.5; 2022: 31.9; 2023: 32.0; 2024: 32.1; 2025: (not listed)
- Fiscal balance (% GDP): 2021: -0.3; 2022: 0.5; 2023: 0.2; 2024: (not listed); 2025: (not listed)
- Public debt (% GDP): 2021: 41.0; 2022: 37.7; 2023: 38.3; 2024: 36.7; 2025: 35.6
- Monetary and Credit
- Broad money (% change): 2021: 0.1; 2022: -2.0; 2023: 2.9; 2024: 2.6; 2025: (not listed)
- Credit to the private sector (% change): 2021: 3.8; 2022: 1.8; 2023: (not listed)
- 3-month Treasury bill interest rate (%): 2021: -0.8; 2022: 0.9; 2023: 1.7; 2024: …
- Balance of Payments
- Current account (% GDP): 2021: 6.9; 2022: 9.4; 2023: 7.6; 2024: 8.2
- Net FDI (% GDP): 2021: -1.6; 2022: 10.8; 2023: (not listed)
- Reserves
- (end-of-period, billions of US dollars): 1014; 852; 724
- External debt (% GDP): 2021: 293.3; 2022: 274.7; 2023: 241.1
- Exchange Rates
- CPI-based REER (% change): 2021: -2.5; 2022: 0.3; 2023: 3.1
IMF Executive Board Concludes 2024 Article IV Consultation with Switzerland (Press Release No. 24/216).
