Country Forecast Switzerland May 2018 Updater

Country Forecast Switzerland May 2018 Updater

  • May 2018 •
  • Report ID: 4984120 •
  • Format: PDF


  • Owing to Switzerland's constitutional arrangements, a culture of political consensus and the expectation that all members of the Federal Council (the cabinet) defend the common positions of the coalition govern-ment, 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 2018 it started collecting signatures for another referendum on immigration.
  • 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 2018 Alain Berset (SP) succeeded Doris Leuthard (CVP) as federal president.
  • Relations with the EU have been strained, owing to the 2014 referendum on limiting immigration from the bloc. Parliament approved a "light" implementation of the quotas in December 2016, but a second referendum on the issue is likely. In March Switzerland declared its intention to make its contribution to the EU's cohesion fund conditional on developments regarding equivalent status to Swiss stock exchanges by the EU. Tensions over the framework of bilateral relations are likely to persist.
  • 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 a balanced budget over the economic cycle. We expect modest fiscal surpluses averaging 0.4% of GDP in 2018-22. We expect the debt stock to fall, from 29.7% of GDP in 2017 to 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.
  • Real GDP growth slowed from 1.4% in 2016 to 1.1% in 2017, but we expect momentum to build in 2018, when we project growth of 2.3%. Thereafter we forecast annual average growth of 1.7% in 2019-22, although downside risks include currency volatility, a slowdown in global trade and strained EU relations.
  • There was a substantial current-account surplus, equivalent to 9.8% of GDP, in 2017. We expect a surplus of 9.6% in 2018 and 9.3% on average in 2018-22.


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