The economy has weakened thus far in 2015, but growth is projected to rise gradually into 2016 as the recent large exchange rate appreciation is absorbed. Private consumption should hold firm on the back of rising real wages and very favourable financial conditions, but exports and business investment will suffer. Lower oil prices combined with the higher Swiss franc are bringing inflation back into negative territory.
Policy interest rates will remain negative for the foreseeable future. Should growth slow further, healthy public finances leave ample room for fiscal support. Stepping up funding for childcare and education for migrant children would boost job opportunities for women and increase growth. Raising competition and efficiency in health care could free up consumer spending for other items.
Investment will be hit by lower business confidence, exchange rate volatility and the uncertainty surrounding the implementation of immigration quotas in 2017. In the medium term, as the country phases out its nuclear power plants, investment in other forms of energy will need to increase, which should boost domestic demand. Transport infrastructure is already well developed, but implementing peak-load pricing in motorway and train transportation could help reduce congestion and boost productivity.