IMF expects recovery after temporary slowdown of growth

Bern, 23.03.2015 - The International Monetary Fund (IMF) expects Switzerland's economic growth to slow down to less than 1% this year. It expects a negative rate of inflation in 2015 due to the strong franc and low oil prices. To support growth, the IMF mission sees possibilities for achieving further monetary easing via asset purchases by the SNB. The IMF welcomes the ongoing efforts to increase stability in the financial sector.

According to the preliminary findings of the latest IMF consultations, economic growth in Switzerland can be expected to slow to about 0.75% in 2015. As a result, the IMF's forecast is somewhat lower than that of the Confederation's panel of experts. The outlook for this year has been clouded by the appreciation of the Swiss franc in particular. For the medium term, by contrast, the IMF expects a gradual recovery and growth of around 2%.

According to the IMF staff, the risks that the medium-term economic recovery is subject to lie in the global environment, the uncertainties arising from the implementation of the popular initiative against large-scale immigration and persistently low inflation rates.

The IMF believes that further monetary easing would help limit the near-term growth slowdown and reduce the overvaluation of the Swiss franc. One possibility the IMF sees is the purchase of foreign-currency assets by the Swiss National Bank (SNB). In addition, the IMF is of the opinion that the negative interest rates help to reduce the upward pressure on the Swiss franc. It thus recommends leaving them at the present level. Moreover, the IMF counsels further efforts to increase the SNB's capital in view of its large balance sheet.

The IMF shares the view of the Federal Council that no economic stimulus programme is required at the moment. To ensure the sustainability of the public finances against the backdrop of demographic developments, the IMF underlines the importance of swift implementation of the ongoing pension reform. It also underscores the significance of swift implementation of the third series of corporate tax reforms.

Finally, the IMF welcomes the progress made in enhancing the stability of the financial sector, namely in the case of banks' capital ratios, regulatory projects and the framework for financial market supervision. At the same time, the IMF sees further need for action. It encourages FINMA to continue to refine its use of external auditors. Furthermore, in the view of the IMF, the supervisory authorities should increasingly monitor the impact of the strong franc and low interest rates on pension funds and life insurers. The minimum leverage ratio requirements for systemically important banks should be increased. The IMF also suggests bringing the Swiss deposit insurance scheme into line with international standards. Finally, close attention should continue to be paid to developments in the mortgage market and the housing sector in the IMF's opinion.

The IMF delegation conducted this year's country evaluation in Bern and Zurich from 13 to 23 March 2015. The regular evaluation of the economic and financial policies of its member states within the scope of the Article IV Consultation is a core element of the IMF's surveillance mandate.

Address for enquiries

Mario Tuor, Head of SIF Communications
Tel. +41 58 462 46 16, mario.tuor@sif.admin.ch