Press Release No. 24/216

IMF Executive Board Concludes 2024 Article IV Consultation with Switzerland

June 24, 2024

Washington, DC: 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.

Executive Board Assessment[2]

Executive Directors agreed with the thrust of the staff appraisal. They welcomed the Swiss economy’s strong fundamentals, resilience, and the envisaged gradual recovery. They considered risks to be balanced, but with uncertainty mainly associated with geoeconomic fragmentation and the intensification of regional conflicts. In this context, they underscored the importance of continued prudent macroeconomic and financial sector policies. Further progress on addressing challenges related to demographic and climate change will also be critical for a robust medium‑term outlook.

Directors highlighted that the debt brake rule has anchored fiscal policy well, allowing for a substantial reduction in public debt while incorporating adequate flexibility to address shocks. They considered the current fiscal stance to be broadly appropriate but underlined the importance of closing structural deficits for 2026–27 and developing a comprehensive medium‑term plan to address mounting pressures related to aging, climate change, and defense. They welcomed the recent fiscal sustainability report as a basis for formulating policy proposals.

Directors commended the decisive actions of the Swiss National Bank (SNB) that have curbed inflation, and agreed that the March rate cut was appropriate. They concurred that monetary policy should remain data‑dependent given uncertainty around the inflation outlook. Directors encouraged the SNB to gradually reduce its balance sheet while building buffers from retained earnings.

Directors welcomed the resilience of the financial sector but noted pockets of vulnerabilities, particularly related to the real estate sector, which require continued vigilance. They stressed the need for strong financial sector reforms, informed by the lessons from the Credit Suisse crisis, and welcomed the authorities’ review of the too‑big‑to‑fail regime. Enhancing the macroprudential toolkit to address real estate risks and closing data gaps would be important. Directors welcomed efforts to strengthen the AML/CFT regime and anti‑corruption frameworks. They encouraged the authorities to implement the remaining recommendations from the 2019 Financial Sector Assessment Program (FSAP) and noted that the 2025 FSAP would provide updated recommendations.

Directors emphasized that ongoing skills gaps and demographic challenges require continued efforts to incentivize higher participation of women, older workers, and migrants, along with pension reforms. They welcomed recent progress on climate policy and urged additional efforts in this area. They positively noted the resumption of negotiations with the EU on participation in the single market.

It is expected that the next Article IV consultation with Switzerland will be held on the standard 12‑month cycle.

[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

[2] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summing up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm.