With the decline in global demand, prices for food, raw materials and oil have fallen sharply. This is the positive flipside of the coin, since this development will boost real incomes and consumption in most countries. Swiss economic outlook The Swiss economy is of course affected by this worsening of the international environment. At our September assessment, we were still projecting a marked slowdown in activity, but with growth remaining positive in 2009. We are now forecasting that GDP growth will be negative, not only during the first two quarters of next year, but also on average for 2009 as a whole. With the probable exception of consumption, all demand components should decline. Exports of equipment goods, demand for which is known to be cyclical, will be affected. In most countries, difficulties in sales and distribution, on the one hand, and restrictions on lending conditions, on the other hand, have prompted a downward revision of investment plans. The US and Europe are cases in point, but a loss of momentum is also being observed in emerging markets. These developments will weigh heavily on our exports of equipment and intermediate goods. The substantial decline in demand for vehicles made by US and European manufacturers will also impact on their Swiss-based suppliers. The metals, machinery and electronics industry was the first to experience a sharp correction in new orders. The worsening outlook for sales will lead to an adjustment of investment plans in Switzerland as well.
You may recall, for instance, that the Basel Committee on Banking Supervision was created in 1974, in the wake of the mistrust triggered by the bankruptcy of the German bank Hersttat; that the Financial Stability Forum was set up in 1999, following the bankruptcy some months earlier of the hedge fund “Long Term Capital Management”; and that the successor to this forum, the Financial Stability Board (FSB), came into being in 2009, after the Lehman Brothers debacle some months earlier. It is this latter institution, the FSB, which is pushing through a thoroughgoing amendment of the international regulatory framework, seeking to reduce the likelihood of further crises in the future. In this connection, the FSB has benefited from decisive contributions by, among others, the Basel Committee on Banking Supervision. Identification of initiatives on the international regulatory agenda Initially, the FSB identified a series of issues with a view to organising a coordinated agenda of regulatory initiatives at the international level. Some aspects of the initial analysis, such as the design of structural measures in the banking sector (which were, in principle, highly oriented towards setting limits on the size of banks), were initially rejected by the FSB. However, as we now know, there have been several initiatives along these lines. Cases in point are the Volcker Rule in the United States, or the measures in the Vickers Report in the case of the United Kingdom.