After warning that federal budgets will have to tighten over the next few years, the Swiss government has now confirmed that the country's annual deficit is not as extreme as once feared. The turnaround has been attributed to a combination of domestic and international events that have gone in Switzerland’s favour, ranging from the Credit Suisse merger to the energy crisis.

Swiss federal finances healthier than expected

In a statement released on August 16, the Federal Council confirmed that Switzerland’s chequebook is more in order than once predicted. In June, the government said it expected the country to run a 4,8 billion franc deficit in 2023 and register a 6,7 billion franc net loss in 2024. 

Now, federal authorities have predicted that the government will run a much smaller deficit in 2023. They forecast that federal authorities would receive an “income” of 79,4 billion francs this year, through taxes and investments, while spending 80,1 billion francs on social security, public transport and other services. Once debt from the previous year is taken into account, in their final estimate, officials said they expect Switzerland to be just 1,5 billion in the red by the end of the year.

Federal deficits lower than during pandemic

For reference, the federal government usually ran a budget surplus of between 2 and 3,6 billion francs a year until 2020, when the pandemic saw the government spend big to combat the effects of lockdown - federal deficits ran at -15,8, -12,2 and -4,3 billion francs a year between 2020 and 2022. From 2024, the government predicts that it will run a deficit of 0,2 billion in the first year, followed by successive 2 billion-franc deficits in 2025 and 2026.

In a statement given to Swissinfo, the Federal Council explained that it had expected the deficit for 2023 to be higher due to extraordinary social spending on Ukrainian refugees and the proposed bailout plan for Swiss energy providers worth 4,5 billion francs, which would have been used if the energy crisis predicted last winter had become a reality.

4,5 billion-franc fund scrapped from Swiss budget

Now, with the fears of an energy shortage largely abated, federal authorities confirmed that the energy rescue fund will be scrapped from the budget, noting that it would “not be needed as things currently stand.” Spending on social security for Ukrainians has also been cut, with the government stating that it expects just 66.000 Ukrainian citizens to arrive in the country this year, down from the 100.000 expected and budgeted for.

The last eight months have also seen events that have boosted the government’s finances. The Federal Council noted that it has recently made 61 million francs profit from selling public defence contractor Ruag, and made huge windfalls thanks to the UBS takeover of Credit Suisse - the banks have already paid the government's emergency loans back with interest.

Lack of Swiss National Bank dividend leaves hole in finances

The only weight on federal finances remains the lack of a profit dividend from the Swiss National Bank, after it recorded losses of 132 billion francs last year. The government expects a 2 billion-franc decline in profits as a result.

For more information, check out the official press release.

Thumb image credit: Petr Pohudka / Shutterstock.com