The reasons for this relatively strong performance are manifold: To start with, Switzerland did not suffer from a housing market correction or over-indebtedness of the private sector. Moreover, favourable labour market conditions and migration have remained a constant support to private consumption. Chart 5 shows the level of GDP for different countries, indexed to 100 at the respective precrisis peak. Swiss GDP is now nearly 8% above its pre-crisis peak. As can be seen in the chart, among large advanced economies this performance is matched only by the US. Economic growth held up relatively well even in years when the economy faced a strong and abrupt exchange rate appreciation. A major factor here is monetary policy: With its monetary policy measures, the SNB was able to absorb some of the risks affecting the economy during the various episodes of the financial crisis. Another factor is the Swiss economy’s high degree of competiveness. Chart 6 shows that Switzerland topped the global competitiveness ranking once again in the World Economic Forum’s report for 2015–2016. Swiss companies’ technological readiness, business sophistication and flexibility are among the factors that make Switzerland one of the most competitive countries in the world. This is not to say that adjustment is painless. Far from it: Organisational changes are never easy and cost-cutting is often painful – especially for employees. Moreover, the relative resilience of real GDP growth is to some extent due to companies’ willingness to accept lower profit margins. Chart 7 shows real, i.e. inflation-adjusted, export volumes and nominal export turnover.
The success of the reforms will indeed hinge on perseverance – as no reform has a one-year pay-back – and on their overall consistency, as all reforms are in a close interaction. Let me start first with the interaction between the public debt, efficient public spending and the tax system. Although some progress has already been achieved, structural public finance reforms are still needed. Thanks to the strong economic growth in 2017, the headline deficit fell below the 3% threshold, reaching 2.6% of GDP, and finally complies with the Stability and Growth Pact deficit rule. A tax reform was voted last Fall, lowering the tax burden on companies and on capital: the corporate tax rate will gradually fall from 33% to 25% in 2022 and personal capital income will be taxed by a flat rate from 2018. And last week, the French government published its revised medium-term targets: the public deficit is projected to turn into a slight surplus by 2022, while the public debt-to-GDP ratio – which reached 97.0% of GDP in 2017 – would decline by almost 8 percentage points at the same 5-year horizon. This ambition is very welcome but the better-thanexpected results of 2017 should not make us complacent about the remaining challenges. Even with favourable cyclical conditions and persistently above-trend GDP growth forecasts, the success of the consolidation strategy will depend on capping public spending growth.