are fewer domestic investment opportunities and growth prospects are muted. japan therefore exports capital abroad and has a current account surplus. there are thus structural reasons why countries have a current account balance above or below zero for an extended period. surpluses or deficits therefore do not necessarily indicate an overvalued or undervalued currency, or present a risk for the country and the global economy. 5 how can we distinguish between those current account surpluses or deficits that can be explained by fundamental factors, and those that cannot? the imf has developed a model for conducting a thorough analysis of the impact of various economic drivers on individual countries ’ current account balances. these drivers include demographics, the level of development of a country, and fiscal policy – in other words, factors that influence savings and investment. the results of the model are incorporated into an annual report, the external sector report, which i mentioned in my introduction. nevertheless, it is not enough just to apply the model in a mechanistic way. the imf therefore also takes country - specific circumstances and features of balance of payments data into account in its assessments. in switzerland ’ s case, it concludes that the current account surplus is in line with macroeconomic conditions and is not the result of an undervalued currency or inappropriate monetary or fiscal policy. this brings me to the factors contributing to the persistent current account surplus in switzerland. factors contributing to the persistent current account surplus in switzerland switzerland ’ s current account surplus, reported in accordance with international standards, is driven by special factors. first, our current account surplus or savings surplus is overstated due to statistical distortions. second, structural factors are in play that tend to contribute to a savings surplus. one of these is demographics, which have a decisive impact on the high levels of household saving in switzerland. high current account deficits may occasionally lead to refinancing problems, so - called balance of payments crises. this speech does not address the financing side of current account deficits in any detail, but focuses solely on the current debate concerning exchange rate manipulation in connection with current account surpluses. page 7 / 13 then, third, we must consider the industrial structure of the swiss economy, which means that the current account and the economy as a whole do not necessarily move in parallel when the exchange rate changes. in switzerland, two industries are largely responsible for the trade surplus, namely pharmaceuticals and merchanting, the net exports of which are only slightly impacted by exchange rate movements

favourable housing market developments. third, exports were relatively resilient to international headwinds. fourth, as we have already seen, monetary policy acted to limit the negative impact of the swiss franc ’ s massive appreciation. let me now elaborate on the structural factors that have played an important role in strengthening the resilience of the swiss economy to shocks. i will start by focusing on some interesting shifts that have taken place in the structure of swiss international trade. 4. 1 innovative and diversified swiss international trade looking at the structure of switzerland ’ s international trade will allow me to dispel some wellestablished preconceptions about the swiss economy. if i asked you to list some core swiss economic sectors, you would probably mention banks, watches and chocolate. but switzerland is much more than that. the swiss economy is in fact highly diversified. for example, the share in total value added of the sector comprising financial, insurance and bis central bankers ’ speeches business services is smaller than the eu average ( 20. 3 % vs 26. 2 % in 2012, according to oecd figures ). by contrast, the share of the manufacturing sector is significantly larger. overall, the amount of goods and services that switzerland sells abroad is equivalent to half of its gross domestic product ( gdp ). goods dominate export activity but, with a share of one - third, the contribution of services is by no means negligible. the export intensity is significantly above the oecd average. switzerland is surpassed by the benelux countries, however. part of the gap with the benelux reflects the extensive re - exports of imported goods generated by the activity of the world - class ports in belgium and the netherlands. admittedly, access to the sea is not a key comparative advantage of switzerland … in order to maintain competitiveness, the swiss export sector has gone through profound structural changes during the last decades. first, there has been a shift in the composition of the export sector ( figure 4 ). the pharmaceutical industry has gained in importance, whereas the share of exports of machinery has declined. in passing, let me just mention that the popular cliche which associates switzerland with watches is actually true. their share in total goods exports is sizeable ( 11 % ). note, however, that this has nothing to do with cuckoo clocks, which were invented and are produced in germany. a closer look at the development across industries reveals that this compositional shift is important in understanding swiss performance during the crisis.