Switzerland: Financial services risk
Economic activity is expected to contract somewhat in 2009, due to poorer export prospects and a diminished contribution of financial services, followed by a rebound in 2010 as global financial market turbulence abates. Inflation is projected to fall back to 1%, reflecting lower oil prices, the opening of an output gap and wage moderation. A further reduction in policy interest rates may be needed, but monetary policy stimulus will have to be withdrawn in the course of 2010. Fiscal policy should allow automatic stabilisers to operate.
Reduced profits of Swiss multinationals abroad, including in the financial sector, are narrowing the current account surplus. As financial services contribute over 12% to Swiss GDP, significantly more than in most OECD countries, a prolonged decline in global activity in this sector would directly affect economic growth and tax revenues.