Since the third quarter of 2003 the Swiss economy has experienced a period of recovery. After an initial acceleration, however, the slowdown in international trade and the softness in the European economy held back the expansion in exports, and the upswing was not powerful enough to fully feed through to the domestic sector. In this situation, the Swiss National Bank held short-term interest rates at a historically low level. The combined impact of the low level of interest rates and the lack of inflationary expectations caused long-term interest rates to fall. This expansionary monetary policy helped to support growth. There has been a clear improvement in the utilisation of technical capacities in industry and the financial situation of many companies has improved. However, to date uncertainty has held back both investment and job creation.

The surge in the prices of basic energy resources, the disastrous weather conditions in the United States and the weakness in domestic demand on the continent of Europe could prompt fears of an imminent slowing in the economy. However, the SNB believes that if such a slowdown occurs, it will be temporary and of limited intensity, and that growth in the world economy will soon return to a level close to its potential. Admittedly, this scenario presupposes a start to, or continuation of the process of normalisation in monetary conditions – which are still very accommodating in most countries. Assuming that recovery in the international economy continues, the SNB expects that the pace of growth of the Swiss economy will accelerate.