Switzerland’s Growth Outlook Constrained by External Shocks, Says IMF Board
The Executive Board of the International Monetary Fund (IMF) has completed its 2025 Article IV Consultation for Switzerland, underscoring the country’s robust fundamentals while warning of emerging risks tied to global trade tensions, demographic pressures, and the financial system’s vulnerabilities.
The IMF projects Swiss growth to gradually converge to potential by 2028, with near-term performance constrained by external headwinds. “Downside risks stem from escalating trade tensions, volatile energy markets, and intensified safe-haven flows that could challenge Switzerland’s export-oriented growth model,” the Fund stated. On the upside, easing trade frictions with the United States could support stronger growth.
The Swiss National Bank’s (SNB) recent decision to cut the policy rate to zero was described as “warranted” given low inflation and weakening labour market conditions. However, with limited room for further easing, the Fund urged careful calibration of policy tools and enhanced communication to manage expectations in a volatile environment.
On fiscal policy, Directors broadly agreed that the moderately expansionary stance for 2025 is appropriate, but cautioned that aging-related costs, climate commitments, defense requirements, and pension reforms demand a comprehensive medium-term fiscal strategy. They stressed that the debt-brake rule should retain flexibility to avoid procyclical tightening if shocks materialise. Some Directors also suggested a more expansionary stance to counter deflation risks and reduce current account surpluses.
The Board noted progress since the Credit Suisse crisis in strengthening Switzerland’s Too-Big-To-Fail framework, urging swift implementation of reforms to enhance the supervisory powers of FINMA, broaden macroprudential tools to address real estate risks, and bolster the financial safety net. The recently concluded Financial Sector Assessment Program (FSAP) found the system resilient, though vulnerable to real estate exposures and low interest rates.
Directors also highlighted structural challenges, particularly productivity gaps among SMEs and services. They encouraged authorities to streamline business procedures, broaden access to R&D and finance, and press ahead with reforms to the Cartel Act and Vocational Training Act.
“Switzerland’s strong institutions, prudent policies, and skilled labour force continue to underpin resilience,” the IMF Directors stated, commending the country’s engagement with external partners, including a new agreement with the European Union, and its support for multilateralism.
