IMF supports Swiss economic policy approach

Bern, 26.03.2018 - According to the International Monetary Fund (IMF), the economic upturn in Switzerland is strengthening further. The Swiss economy was able to cope with the exchange rate challenges of recent years. The IMF supports the planned structural reforms, especially the swift implementation of "tax proposal 17" (TP17) corporate tax reform. It also recognises progress in strengthening the stability of the financial sector. The IMF sees potential risks in particular in international trade policy and in the Swiss real estate and mortgage market.

Thanks to its high degree of adaptability, the Swiss economy has been relatively robust in the last few years in the face of pressure from the strong franc. In the wake of the global economic recovery, this pressure has recently eased and economic growth in Switzerland has gained momentum. The IMF predicts growth of 2.25% for Switzerland in 2018 and thus confirms to a large extent the economic forecasts of the federal government's group of experts. According to the IMF, inflation should remain moderate.

The IMF experts see risks to the economic outlook in particular in a possible intensification of international trade policy and geopolitical tensions, an unexpected sharp tightening of global financing conditions and in the imbalances in the Swiss real estate and mortgage sector.

The SNB's monetary policy strategy of negative interest rates and occasional interventions on foreign currency markets has proved its worth in the eyes of the IMF. This was able to prevent an excessive appreciation of the franc and stabilised inflation.

As regards public finances, the IMF acknowledges Switzerland's continuously solid position. For the federal budgetary policy, it recommends examining ways of adapting the debt brake rule, as a safeguard for potential future economic headwinds. The IMF praised the steps already taken and the ongoing clarification of the Federal Department of Finance in this area. The financial surpluses at federal level help reduce Switzerland's public debt.

The IMF welcomes Switzerland's considerable progress in strengthening financial stability, especially in the area of systemically important financial institutions. In connection with the low interest rate environment, it advises continued monitoring of the risks in the mortgage and real estate market and further measures to reduce these risks. Furthermore, the IMF continues to consider the implementation of international standards in the financial sector to be important.

Finally, the IMF supports important reform projects to strengthen the competitiveness and flexibility of the Swiss economy. These include the planned reform of corporate taxation ("tax proposal 17"). The IMF also recommends reforms to safeguard long-term retirement provisions especially in view of increases in life expectancy.

The IMF delegation conducted this year's country evaluation in Bern and Zurich from 15 to 26 March 2018. 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.

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Frank Wettstein, Communications, State Secretariat for International Financial Matters SIF
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Federal Department of Finance