The Swiss economy is likely to slow in 2019, with gross domestic product growth expected to hit 1.1%, followed by a “moderate” recovery in 2020, the International Monetary Fund said on Monday.
The IMF said in a concluding statement, published on Monday following a mission to Switzerland and an annual evaluationexternal link, that a “sustained regional slowdown, intensification of global trade tensions and a disruptive Brexit” would adversely affect the Swiss economy.
Other factors that are expected to impact growth include weak external demand, subdued domestic demand and the absence of biennial international sporting events. Inflation is expected to remain just below 1% this year.
The IMF growth figure is slightly lower than the latest Swiss National Bank (SNB) forecast from a few days ago (1.5%), while the State Secretariat for Economic Affairs (SECO) also predicted 1.1% growth for 2019. In 2018, GDP growth stood at 2.5%.
Rachel van Elkan, head of the IMF mission to Switzerland, told reporters in Bern on Monday that in general Swiss monetary policy had helped mitigate the effects of the strong franc and stabilise inflation. Public finances were strong, but more government investment could help support the economy, van Elkan noted.
At the national level, the IMF sees risks in Swiss real estate and in mortgage loans, where 85% of banks' assets are concentrated. Pension funds and insurance companies are also highly exposed, it added.
The IMF also noted that uncertainties over corporate taxation and old-age pensions could increase volatility for business operations.
In their assessment, the IMF also recommended the Swiss authorities beef up the role of the Swiss Financial Market Supervisory Authority (FINMA) and increase the number of staff. It said the financial watchdog should be able to carry out more on-the-spot checks, especially on the largest banks.
The IMF delegation conducted the review of Switzerland from March 21 to April 1.