In 2020, the Swiss economy contracted by 2.9%, less than other European advanced economies. According to the IMF, the impact was cushioned by the solid public and household finances, competitive export industries, the large and well-capitalised financial sector, low dependency on contact-intensive sectors, the well-resourced healthcare system and targeted containment measures. The swift emergency measures exceeding 10% of GDP to provide targeted support for households and businesses were also crucial in curbing the economic slowdown.

Given the ongoing uncertainty and fiscal policy leeway, the IMF recommends maintaining targeted support for demand until the recovery is secured. In view of the still subdued outlook for inflation, the IMF additionally advises keeping monetary policy accommodative. In the event of large capital inflows into Switzerland and strong appreciation pressure on the Swiss franc, this could also include forex market interventions.

The Swiss banking sector entered the COVID-19 crisis with strong buffers and has incurred only limited losses so far. The IMF recommends continuing to keep an eye on real estate price developments, monitoring financial market participants' risk controls and buffers, and taking early action if needed.

In order to preserve jobs, the IMF believes that crisis-related support measures in the labour market should be maintained until a sustained recovery is under way. At the same time, it cautions that keeping support measures too long could impede necessary structural adjustments.

In the longer term, the IMF recommends supporting digital and sustainable growth with efficient and targeted measures. The required investments, including in the energy system, transport and building renovation, must take account of synergies with ongoing programmes and ensure high effectiveness and efficiency of expenditure.

Finally, the IMF considers more far-reaching reforms to secure pension benefits in the longer term to be important, especially in view of rising life expectancy. Among other things, the retirement age should be raised more significantly and linked to life expectancy.

The IMF delegation conducted this year's Article IV Consultation from 17 March to 7 April 2021 via video conferences, following the cancellation of last year's evaluation because of the pandemic. The regular evaluation of the economic and financial situation of its member states within the scope of the Article IV Consultation is a core element of the IMF's economic policy monitoring activities.

IMF praises Switzerland's handling of the pandemic