Growth has slowed in 2012 due to export weakness, although most domestic demand components remain fairly robust. The slowdown is projected to continue into 2013, but activity should then gradually recover as export markets expand. Uncertainty about euro-area developments is high, posing a threat to financial stability.
Zero policy interest rates should be maintained in view of weak underlying price pressures. Given the government’s healthy fiscal position, the automatic stabilisers should be allowed to operate fully. Targeted macro-prudential measures to slow credit growth should be envisaged, especially for the cantonal banks, which are exposed to the housing sector. In the light of the continuing global financial-market risks, the loss-absorbing capital of the two biggest banks should be increased.