IMF Says Switzerland Did Well During Pandemic

Well Done!

The International Monetary Fund (IMF) announced in its report that Switzerland did very well during the pandemic crisis, looking from fiscal perspective. The economic support measures were very well planned, and the monetary policy regarding the exchange rate of CHF was carried out properly, which helped minimize bad influence of the pandemic. “Switzerland has navigated the pandemic well. Covid-19 has had major social and economic impacts, but an early, strong, and sustained health and economic policy response helped contain the contraction of activity,” the IMF said in its statement issued on Monday, June 21st.

Reduced Impact

In 2020 Swiss economy contracted by 3%, the most since late 70’s, but still this was less than in most European countries. This year Switzerland is predicted to recover economically, hitting growth of GDP of 3.5%, meanwhile next year – 2.8%. IMF outlook is in line with the Swiss National Bank’s predictions. The not-so-bad results for GDP for last year, according to IMF, can be credited to  “strong pre-pandemic fiscal, financial sector and household buffers, robust exports (pharmaceuticals, chemicals and gold), low dependency on contact-facing sectors, a capable health system, and targeted containment”. A loss of purchasing power was limited due to measures aimed at helping companies and households during the crisis. The Swiss federal government actions also stopped the potential high rise of unemployment and wave of bankruptcies. This year, IMF foresees the unemployment at 3.5%, whereas next at 3.4%. also, inflation should remain at moderate level. The SNB is very cautious about inflation level, as well as CHF exchange rate. Its interventions on foreign exchange rate market and  sticking to negative low interest rates is aimed at keeping CHF from getting too overvalued.

Looking Ahead

Are there any economic and financial risk lying ahead of Switzerland, according to IMF? Potential risks can come from “lagged Covid-19 impacts, search-for-yield behavior, real estate market imbalances, and an uneven global recovery”. Other challenges in post-pandemic times are limiting scarring among most vulnerable groups and workers, tackling pensions system gaps, sustaining competitiveness, and dealing with climate change. The IMF would like also to see the country and the European Union to  “engage constructively” on an institutional framework deal that would regulate its long-term bilateral relations. Talks on such framework, that was supposed to replace 120 deals now in force, were halted after Switzerland left negotiations table this month.

IMF Report

The report of IMF was conducted by four-person team in spring and published on June 21. The IMF experts talked with the Swiss National Bank, FINMA, the Swiss financial regulator, cantonal authorities, the federal administration and experts from private sector. Specifically, it held talks with Finance Minister Ueli Maurer, SNB Chairman Thomas Jordan and FINMA CEO Mark Branson.