was ceased and the fiscal deficit hit a record high of 7. 7 % of gdp. overall, during this crisis episode, policy response in the region was swifter, bolder and better balanced. looking forward to the policy front, one of the lessons learned from the global financial crisis is that the policy support should not be rollbacked prematurely. thus, the main challenge is how to provide further support for the recovery stage, but without further creation of vulnerabilities on the other fronts. on the fiscal front, emergency stimulus 1 / 3 bis - central bankers'speeches measures have already pushed high public debt to unprecedented levels - 67 % on average, exceeding maastricht criteria, and in some countries reaching up to 100 % of gdp. in this context, credible medium - term fiscal consolidation is necessary to rebuild buffers and maintain credibility of public finances which is very important as investors are expected to start more vigorously differentiating countries based on their vulnerabilities. on the monetary front, apart from the conventional side effects of " too loose for too long " stance, as credit conditions remain highly accommodative, the risk of the so called " zombification " emerges. it is argued that this process reduces the overall productivity in the economy by trapping the available resources and hindering the emergence of new, more productive companies. in a nutshell, the general economic conducive policies need to be smoothly substituted with more specific sectoral polices that will facilitate optimal reallocation of resources and thus underpin post - crisis transformation of economies. notwithstanding all these policy measures, the western balkan economy is projected to rebound by 5. 1 percent in 2021, which implies that pre - crisis gdp level will not be reached this year ; it will be lower by around 5 % in comparison with pre - pandemic forecasts, and the overall loss will not be recouped even over the medium term. this brings us to the fundamental question - to what extent has the crisis affected the potential growth in the region, and what needs to be done to lift it to speed up the convergence which remains low in the region – just 37 % of the eu average. clearly, macroeconomic policies - fiscal and monetary, can play a growth supportive role, especially in the short - run, but they cannot be a substitute for structural policies needed to address structural bottlenecks across all long - term determinants of growth - labor, capital and total factor productivity. now

policy, we therefore decided in january 2015 to change tack. in that exceptional situation, we had to weigh up the pros and cons of using alternative unconventional instruments. it became apparent that we would have to lower interest rates below zero given that various other central banks had already done so. this was the only way we could limit the appeal of the swiss franc. when we discontinued the minimum exchange rate, we thus also imposed negative interest of – 0. 75 % on banks ’ sight deposits held at the snb. this then brought the level of interest rates in switzerland back down below that in other countries. coupled with our willingness to intervene in the foreign exchange market as necessary, the negative interest rate has taken the pressure off the swiss franc and prevented a sharp drop in inflation. broad impact on the economy all in all, the swiss economy got off relatively lightly compared with other countries in the difficult years following the global financial crisis – and this despite the fact that, as a small open economy with a large financial sector, we were hit hard by the shocks. this can be mainly attributed to two factors. first of these was the remarkable flexibility of swiss companies and workers, which made it possible to increase efficiency, develop new products, and tap into new markets. coupled with this, the snb ’ s unconventional monetary policy substantially cushioned the blow of external shocks. the real trade - weighted exchange rate of page 4 / 8 the swiss franc has thus remained fairly stable since september 2011. were it not for the negative interest rate and the extensive interventions by the snb, switzerland would today be facing a different economic reality. the franc would have become much stronger, inflation would have fallen well below zero, growth would have slowed abruptly and unemployment would have risen markedly. for us there is thus no question that the negative interest rate was significant in helping switzerland emerge from a difficult period in good shape. and it is still making an essential contribution to ensuring that our economy continues to fare well today, despite the array of uncertainties worldwide. but how exactly does negative interest work? negative interest rates take effect on an economy in a very similar way to a monetary policy with positive rates. having interest rates slightly below zero does not mean the world has been turned on its head, nor does it run contrary to economic logic. introducing the negative interest rate has on the one hand influenced the financing conditions in the economy. this has been to the benefit of companies, households and the public sector alike. meanwhile