The International Monetary Fund (IMF) on Monday published the concluding statement in its Article IV consultation with Switzerland.
During the mission, IMF officials found that first and foremost, the Swiss
economy had performed impressively during the recent global upswing. Although Switzerland's
international preeminence has eroded in some respects, performance in the recent
cycle has been strong.
Yet, despite this impressive performance, IMF officials have predicted a significant
slowdown in growth is projected. The current global environment is characterized
by a high degree of uncertainty and, hence, projections are subject to more
than the usual imprecision.
According to the IMF, this expected slowdown will stem from several sources, which will
likely emerge sequentially.
It was predicted that exports of goods and services will slow at first,
as US and European imports decelerate. While the stronger Swiss Franc has not
reached levels that would significantly hurt exports, continued appreciation
could have a material effect, especially in combination with a further slowdown
in world growth.
However, the Swiss authorities have responded vigorously to limit the knock-on
effects of the current financial tensions, the IMF stated.
They have injected liquidity into
the banking system, often in coordination with other major central banks, maintained
an enhanced oversight of the major banks and insurance companies, and worked
actively with other regulators to share information, coordinate supervisory
activities, and draw lessons for the future.
For 2008, the average inflation rate is projected at 2.0%, falling to 1.4% in
2009, as assessed by the Swiss National Bank (SNB) in the context of its
March policy decision.
The IMF also found that the state of public finances continued to improve in
2007.
A substantial general government surplus of over 2% of GDP reflected, in large
part, buoyancy in revenues associated with the strong growth but also moderation
of expenditures beyond that required by the discipline of the "debt brake,"
which helps achieve budget balance over the medium-term. Surpluses were recorded
at all levels of government, and their debt-to-GDP ratios continued to decline.
Switzerland's long-term fiscal sustainability does, however, require continued
structural reforms, according to IMF findings.
The Long-Term Sustainability report due to be published in May marks an important
step in recognizing the tasks ahead and raising awareness of needed actions.
Concluding, the IMF summarised:
"Switzerland's high standard of living and recent dynamism are, in no
small measure, due to consistent and forward-looking policies. Rapidly moving
events have placed on policymakers a heavy burden, with the immediate task of
maintaining financial stability."
"Vigilant navigation through these challenging
times should permit a return to economic buoyancy."
"We wish them the very best in achieving their goals."
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