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LONDON (Thomson Financial) - The Swiss economy is seen heading for a gentle slowdown, with GDP growth of about 2.0 pct in 2007 from 2.7 pct in 2006, according to an IMF report.
The slowdown and the risks to this benign picture are largely due to external factors, the organisation said.
"While the outlook is favourable, the authorities need to remain vigilant to global economic and political developments that could affect the economy, including through oil prices, and to (mostly external) risks that could impact on Switzerlands large financial sector."
Inflation too is predicted to ease, from 1 pct last year to a little under that in 2007. The alpine nation is seen benefiting from among others, the opening of the labour market to EU workers, improved productivity, lower oil prices, higher domestic competition and rises in interest rates.
The IMF praised the Swiss authorities for their prudent economic management and sound policy frameworks, but added that the current favourable state of affairs should be used to strengthen potential economic growth further and to address long-term structural and fiscal issues, given population ageing.
Additionally, the IMF said monetary policy will need to remain flexible to respond appropriately to inflation signals. IMF directors also recommended a removal of the regulated link between interest rates and housing rents.
Carry trades which use the Swiss franc as a funding currency also need to be closely monitored, the IMF said.
"Carry-trades could be temporarily weakening the franc to a level below its equilibrium, and the present independent floating exchange rate regime is best to handle these uncertainties," the IMF said.
Countries in Eastern Europe, where the Swiss franc -- by virtue of its low volatility and the low Swiss interest rate -- is the currency of choice for loans -- are contributing to rapid credit expansion.
Developments in carry-trades could also imply important spillover risks for these countries, it added.
LONDON (Thomson Financial) - The Swiss economy is seen heading for a gentle slowdown, with GDP growth of about 2.0 pct in 2007 from 2.7 pct in 2006, according to an IMF report.
The slowdown and the risks to this benign picture are largely due to external factors, the organisation said.
"While the outlook is favourable, the authorities need to remain vigilant to global economic and political developments that could affect the economy, including through oil prices, and to (mostly external) risks that could impact on Switzerlands large financial sector."
Inflation too is predicted to ease, from 1 pct last year to a little under that in 2007. The alpine nation is seen benefiting from among others, the opening of the labour market to EU workers, improved productivity, lower oil prices, higher domestic competition and rises in interest rates.
The IMF praised the Swiss authorities for their prudent economic management and sound policy frameworks, but added that the current favourable state of affairs should be used to strengthen potential economic growth further and to address long-term structural and fiscal issues, given population ageing.
Additionally, the IMF said monetary policy will need to remain flexible to respond appropriately to inflation signals. IMF directors also recommended a removal of the regulated link between interest rates and housing rents.
Carry trades which use the Swiss franc as a funding currency also need to be closely monitored, the IMF said.
"Carry-trades could be temporarily weakening the franc to a level below its equilibrium, and the present independent floating exchange rate regime is best to handle these uncertainties," the IMF said.
Countries in Eastern Europe, where the Swiss franc -- by virtue of its low volatility and the low Swiss interest rate -- is the currency of choice for loans -- are contributing to rapid credit expansion.
Developments in carry-trades could also imply important spillover risks for these countries, it added.
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