IMF praises Switzerland for weathering Covid-19 crisis

A lakeside view of Lucerne. Restaurants and cafes were able to open outside terraces on April 19, 2021. Keystone / Alexandra Wey

The International Monetary Fund (IMF) says Switzerland has managed to cope well with the coronavirus pandemic from a financial perspective. In its latest country report, the IMF applauded Swiss Covid support measures and monetary policy.

“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 a statementExternal link on Monday.

The Swiss economy shrunk by 3% in 2020, less than most other wealthy European countries. The IMF says it expects Swiss growth to hit 3.5% in 2021 and 2.8% in 2022. These are in line with Swiss National Bank predictions.

According to the IMF, the economic impact of the pandemic was reduced thanks 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”.

Coordinated efforts aimed at households and firms reduced a loss of purchasing power and a rise of unemployment and bankruptcies, it said.

The IMF expects the unemployment rate in Switzerland to rise to 3.5% in the current year, before falling slightly to 3.4% in 2022. It also predicts modest inflation.

Going forward, the IMF says potential economic risks come from “lagged Covid-19 impacts, search-for-yield behaviour, real estate market imbalances, and an uneven global recovery”.

Post-pandemic challenges include “limiting scarring” – especially among vulnerable groups and workers, sustaining competitiveness, tackling pension system gaps, and addressing climate change, it said.

In its report the IMF also encouraged Switzerland and the European Union to “engage constructively” on an institutional framework agreement to regulate long-term ties “to avoid negative impacts over time”.

A four-person IMF team carried out the review of Swiss economic and financial policy in spring as part of an annual consultation process. A final report was published on June 21.

The team talked with experts from the federal administration, the Swiss National Bank (SNB), the Swiss financial watchdog (FINMA), cantonal authorities and the private sector. It also held talks with Finance Minister Ueli Maurer, SNB Chairman Thomas Jordan and FINMA CEO Mark Branson.