The International Monetary Fund (IMF) has forecast a gradual recovery for Switzerland's economy, predicting an increase in growth to 1.3 per cent in 2024 and 1.4 per cent in 2025. This outlook follows a period of slower economic growth in 2023, where the growth rate declined to 0.8 per cent due to weak external demand and tighter financial conditions. Despite the economic slowdown, Switzerland's labour market demonstrated resilience, although there was a slight rise in unemployment from historically low levels. Fiscal policy remained supportive, maintaining a surplus, while monetary policy effectively kept inflation within the target range of 0-2 per cent, which is projected to average 1.5 per cent in 2024. The IMF noted that the current account surplus in Switzerland fell in 2023, impacted by lower merchanting and a reduced services trade balance. However, it is expected to stabilise with a gradual recovery in external demand, despite the challenges posed by an appreciated currency. The financial markets were stabilised following the state-facilitated acquisition of Credit Suisse by UBS in 2023, which the IMF highlighted as a crucial step with minimal spillover effects on the broader economy. Nevertheless, the IMF raised concerns about the large size of the merged entity, calling for robust financial sector reforms to mitigate potential risks. Key risks identified by the IMF include potential economic impacts from regional conflicts and global slowdowns, as well as challenges related to the integration of Credit Suisse and UBS. Over the medium term, risks such as geoeconomic fragmentation and potential setbacks in EU relations could pose further challenges.
