Summary: The economy has adapted well to the appreciation that followed the exit from the exchange floor. Growth is expected to reach 1½ percent this year and to stabilize at around 1¾ percent over the medium term. A resurgence of capital inflows, a sharp adjustment in property prices, renewed concerns over large global banks and changes to Swiss-EU relations pose risks to this outlook. The two-pronged approach to monetary policy helped avert a prolonged slowdown and sustained deflation by limiting further appreciation, with some support from fiscal policy. Elevated exposure to mortgage debt continues, and low interest rates could rekindle a credit-driven upswing in house prices. Population aging and slower immigration will create funding gaps in the public pension system, while minimum mandated interest rates for private pensions that exceed market rates could affect viability. The Swiss systemically-important global banks are continuing to build their financial strength. Corporate tax reform is expected to trim future tax revenue.

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