2024 IMF Article IV Generally Supportive; Notes Risks

The IMF concluded its Article IV consultations with Switzerland, offering a generally supportive assessment whilst outlining some fairly typical risks to the economic outlook (link here).

• Generally, they note that "weak external demand and tighter financial conditions" lowered growth recently but the labour market is deemed "resilient".
• SNB action to tackle inflation is commended and financial resilience welcomed.
• They see medium-term growth at around 1.5% Y/Y, higher than SNB President Jordan's recent estimation of potential growth currently around 1.0%.
• They see high uncertainty, and reckon downside risks on the back of intensification of regional conflicts, a global slowdown, the ongoing CS/UBS integration, geoeconomic fragmentation, and EU relations.
• They call for "strong" financial sector reforms, particularly in the context of the CS/UBS integration.
• They also note vulnerabilities in the real estate sector, mirroring SNB governing board member Schlegel who recently mentioned that real estate prices in Switzerland are not explainable through common models and remain subject to risk.
• They also acknowledged that inflation printed comparatively low in the country, and suggest the SNB should remain data-dependent "given uncertainty around the inflation outlook" and to gradually reduce its balance sheet.