Country Forecast Switzerland December 2017 Updater

Country Forecast Switzerland December 2017 Updater

  • December 2017 •
  • Report ID: 358883 •
  • Format: PDF


  • Owing to Switzerland's constitutional arrangements, a culture of political consensus and the expectation that all members of the Federal Council defend the common positions of the coalition government, The Economist Intelligence Unit does not expect the Swiss People's Party (SVP) to compromise political stability over the forecast period (2018-22). However, since its favourable 2015 election result, the SVP's capacity to unsettle Swiss politics has increased.
  • In December 2015 the SVP won a second cabinet post. Both the SVP and its main rival, the Social Democratic Party (SP), are in the seven-member government, along with the Free Democratic Party (FDP) and the Christian Democratic Party (CVP). In November 2017 Ignazio Cassis (FDP) succeeded Didier Burkhalter as the minister of foreign affairs.
  • Switzerland's relations with the EU have been strained owing to the 2014 referendum on limiting immigration from the bloc. The situation appears to be nearing a resolution, with parliament approving a "light" implementation of the quotas in December 2016, but a second referendum on the issue is likely. The two sides also held bilateral talks in November 2017, easing some tensions. Switzerland agreed to contribute to the EU's cohesion fund, and to link its carbon market to the EU emissions trading scheme.
  • The financial sector is adapting to more stringent regulations and capital requirements. Banking secrecy is gradually being phased out for international clients, but it will remain in place for domestic banking.
  • A statutory debt brake requires budgetary balance over the economic cycle. We expect modest fiscal surpluses averaging 0.4% of GDP per year in 2018-22. We project that the debt stock will fall, from an estimated 30% of GDP in 2017 to about 26% in 2022.
  • Since abandoning the Swiss franc's exchange-rate ceiling with the euro in January 2015, the Swiss National Bank (SNB, the central bank) has reinstated the target range for the three-month Libor rate-currently between -1.25% and -0.25%-as the main monetary policy instrument while also intervening regularly in the foreign-exchange market to deter upward currency pressure. We expect negative policy interest rates to remain in place until at least 2021, and possibly longer.
  • We expect real GDP growth to slow from 1.4% in 2016 to 0.9% this year, but we expect some momentum heading into 2018, when we project growth of 2%. Thereafter we forecast annual average growth of 1.6% in 2019-22, although there are downside risks: currency volatility and strained EU relations.
  • There was a substantial current-account surplus, equivalent to 9.8% of GDP, in 2016. We expect a surplus of 10.3% this year and 9.8% on average in 2018-22.


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