Switzerland is a privileged creditor. All the rating agencies renew their rating “AAA”, the best. This rating means that government debt securities are considered risk free. Apart from Switzerland, only a few countries obtain this maximum score. This is the case with Germany and the Netherlands, for example. Agency ratings are important because they determine the cost of government borrowing. States considered as privileged creditors can raise capital on the best terms.

The most recent rating for Switzerland comes from the Fitch agency; it was published at the beginning of July. Fitch maintains its “AAA” rating for Switzerland and believes that this rating is not threatened in the medium term. And this, despite a high public deficit and a sharp increase in debt due to the measures taken to fight against the coronavirus pandemic. Fitch explains that Switzerland has good governance, its institutions are strong, the standard of living is high, the banks are well capitalized, the Swiss franc has a good reputation globally and, finally, the economic and fiscal policies. are solid and careful.

According to the Fitch agency, thanks to the debt brake, Switzerland has stable public finances and a low debt ratio; in this area, the Swiss state is at the top of the class. While it is true that the Covid-19 pandemic has seriously affected our economy and our public finances, Switzerland is in a favorable position and can rely on solid institutions. It can therefore support economic recovery without jeopardizing its success factors. Fitch sees no reason to revise Switzerland’s rating lower in the medium term.

The agency’s verdict is flattering. Above all, it confirms that Switzerland has made many good decisions and in particular that sound financial management is useful because it helps to overcome a crisis. The renewal of the «AAA» rating also expresses the expectation that Switzerland will put an end to the increase in debt after the crisis. To support its hypothesis, the agency mentions the strong and broad political support for a bearable debt rate as well as the brake on debt that has contributed to debt reduction in the past.

There’s not much to add to Fitch’s verdict. A strong financial policy and low debt levels were decisive in overcoming the current crisis. The question of how debts incurred in connection with the coronavirus crisis should be managed – an external perspective, in this case that of a worldwide rating agency, can be useful. It is not so much the prestige of the note that counts, but the prosperity of the country. All doors are open to those who benefit from the best borrowing conditions. It is in Switzerland’s interest that this remains the case.

Source : EconomieSuisse

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