Country Report Switzerland

Outlook for 2008-09

• Political business will be more unsettled in the forecast period, at least at first, as the Swiss People's Party (SVP) adapts to opposition politics—the first instance for a major party since 1959.
• The SVP national leadership is pursuing the ejection from the party of one of its members, Eveline Widmer-Schlumpf, who accepted a government position against the SVP's wishes. This could lead to a splintering of the party.
• The government will retain two SVP members, alongside SP, CVP and FDP members. Competition policy, social security reform, energy and EU relations will be the main focus.
• The government is forecast to continue on its path of fiscal consolidation and to post fiscal surpluses. The debt brake mechanism is to be amended to incorporate off-budget expenditure.
• GDP growth hit peaks of 3.2% in 2006 and 3.1% in 2007, driven by exports and private consumption, but is expected to fall to 1.9% in 2008 and 1.7% in 2009.
• The Swiss National Bank (SNB, the central bank) is forecast to keep official interest rates at or close to 3% over the forecast period.
• The Economist Intelligence Unit expects inflation to fall during 2008 from 2.9% in May, giving an annual average of 2.4% in 2008 and 1.8% in 2009.

Monthly review

• The Swiss electorate has rejected a people's initiative that would have tightened the requirements for acquiring Swiss citizenship. The initiative had been championed by the SVP.
• Swiss voters delivered a further clear rejection of another people's initiative that had sought to remove government ministers from the campaigns leading up to referendums.
• The SVP has expelled the whole Graubunden cantonal section from the party for supporting Eveline Widmer-Schlumpf, who joined the government against the SVP's wishes.
• First-quarter budgetary data show that the federal public finances are on a favourable course for 2008. The general government surplus was 2.2% of GDP in 2007, a particularly strong result, following 1.9% of GDP in 2006.
• GDP growth lost momentum in the first quarter of 2008, and leading indicators continue to suggest a further weakening throughout the year.
• Seasonally adjusted unemployment rose in April for the first time in nearly eight years, increasing from 2.54% to 2.55%, possibly marking the bottom of the unemployment cycle.