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Economic activity is picking up after a weak 2017 outturn. An improving external environment and competitiveness gains will revive activity, raising export growth and invigorating investment. Domestic demand should provide additional stimulus as unemployment decreases and incomes rise. Inflation is projected to remain low given excess capacity. The large current account surplus will persist.
Accommodative monetary policy remains appropriate in the near term. As growth strengthens and deflation risks fade, the central bank will eventually be able to begin interest rate normalisation, probably in 2019. The fiscal stance is broadly neutral. Further efforts should be pursued to remove constraints on women’s full participation in the economy, as they overwhelmingly work part-time. In particular, more affordable childcare is needed.
Negative policy rates raise financial-stability risks. The ratio of household debt to GDP is the highest amongst OECD countries, mostly due to the mortgage debt needed to pay for costly housing. A framework should be established for setting mortgage lending limits that incorporates affordability considerations and is enforced. Sizeable net foreign assets imply exposure to interest-rate, credit and exchange-rate risks.
Economic Survey of Switzerland (survey page)