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Old 20.03.2012, 20:28
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IMF / Switzerland--2012 Article IV Statement

Bern, March 20, 2012 The Swiss economy is fundamentally strong. However, it is currently facing a number of challenges. Headwinds from the euro area debt crisis and a strong currency have slowed growth, created deflationary pressures, and forced the SNB to abandon the floating exchange rate regime. The financial sector is adapting to the new, more stringent regulatory environment but remains vulnerable. In addition, exceptionally low domestic interest rates have heightened concerns of a housing bubble. The fiscal position is sound, but pressures from population aging are building up. Against this background, we encourage the authorities to:
  • Return to a freely floating currency once inflation goes back to comfortable levels and growth picks up.
  • Press large banks to move faster to strengthen the quality of their capital, which remains low in comparison to peers and in light of risks.
  • Include affordability limits for mortgages in the new macroprudential toolkit to strengthen safeguards against a potential housing bubble.
  • Stand ready to use the limited space available under the fiscal rules to support aggregate demand if needed. At the same time, accelerate reforms to reduce population aging costs.
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