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08. mar 2004 - The International Monetary Fund (IMF) is of the opinion that the Swiss economy is supported by an appropriate economic policy. Signs of an upturn are clearly visible. The IMF welcomes the package of growth policy measures. If greater competition could be created in the domestic market, higher productivity and stronger growth would be achieved in the long term. The IMF underlines the importance of the current reforms in financial market supervision.
The evaluation of the economic and financial climate of its member states is part of the economic monitoring function of the IMF (accord-ing to Art. IV of it statutes). From 14th - 24th February 2003, an IMF delegation met with representatives from the federal administration, the Swiss National Bank (SNB), the private sector, and civil society in order to carry out its annual country report on Switzerland. The delegation highlighted the following points in its findings:
In all probability economic growth will rise further during the course of the year. The signs of a global upturn have been boosted whilst the monetary environment is favourable. The economic recovery in Switzerland will lead to increased investment and consumer spending. The IMF envisages growth of 1.75% GDP in 2004, which tallies with federal authority forecasts. The greatest risks are posed by stagnating growth in the Euro area and sudden sharp exchange rate fluctuations.
The IMF considers the current expansive monetary policy of the SNB to be appropriate. In spite of the present low rate of price increases, the risk of deflation is considered to be low. In addition, the IMF believes the risk of inflation will remain low for the time being. The continuing under-utilisation of production capacity in particular enables the SNB to maintain its expansive monetary policies for the time being. According to the IMF, a monetary policy correction might be necessary as the output gap closes.
Despite the strained situation with regard to federal finances, the IMF, from a macroeconomic perspective, considers the current fiscal policy to be appropriate. The debt brake is an important instrument in a country with an aging population. However, in order to maintain the debt brake's credibility, the structural deficit must be reduced. According to IMF staff, further savings may be necessary by 2007, beyond the CHF 2.5 billion already envisaged.
Against the backdrop of sharply fluctuating values in global securities and foreign exchange markets, the resistance of the financial sector against diverse risk factors played a central role. Banks should pay particular attention to maintaining rating assessments, whilst insurance companies should boost their operating levels. The IMF raised the issue of the need for more accurate recording by the authorities of pension fund operating results . It proposed consolidating and boosting supervision of the second pillar. Furthermore, it expressed interest in progress towards the creation of an integrated financial market supervisory authority.
The IMF welcomed the package of growth policy measures. It encouraged Switzerland not to simply be satisfied with its existing locational advantages. Protected market sectors and poorly performing domestic markets present a hindrance to promising signs of economic growth in Switzerland, not just in the sectors concerned; they also keep prices and operating costs high in the economy as a whole.
Friederike Pohlenz, Federal Finance Administration, tel.031 322 64 63
08 mar 2004
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