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GDP growth is projected to rise gradually, which will reduce unemployment. The low interest rate environment is set to continue, helping to revive domestic demand. Deflation seems to have been overcome, but inflation is projected to remain low through 2018. The large current account surplus will persist.
A continuation of the policy of negative rates is justified by low inflation and weak growth. Nevertheless, as growth picks up, policy interest rates are projected to begin to rise in late 2018. As persistent very low rates can give rise to major financial distortions, close monitoring and tight prudential regulation should also be retained. Small budget surpluses are expected, and public debt will continue to decline. Available fiscal space should be exploited to support the recovery.
As the economy increasingly opens to Europe and the rest of the world, Switzerland should be able to maintain its enviable economic position. In particular, it has managed to develop several leading global industries. However, well-being would be enhanced if barriers to trade in services were lowered to deepen participation in global value chains. Sizeable immigration has brought increases in skilled labour but has also proved to be challenging, calling for continued focus on integrating new migrants.
Economic Survey of Switzerland (survey page)