Switzerland Business Forecast Report Q4 2012

Core Views Switzerland’s growth trajectory in 2012 and 2013 will be driven primarily by consumer and investment spending, with the potential for the government to step in and boost growth in the event that the situation in the eurozone puts a sharp break on Swiss growth. A combination of a strong currency and weak external demand will see to it that net exports pose a net drag on growth this year and in 2013. The Swiss National Bank has set a ceiling on the Swiss franc’s value versus the euro in the face of substantial appreciatory pressures resulting from the eurozone sovereign debt crisis. This will help to protect the country’s export sector from a severe loss of competitiveness and thereby limit the impact of external turbulence on near-term economic growth. However, the massive scale of the monetary easing involved in such foreign exchange intervention could dramatically inflate property prices if maintained into the medium term. Major Forecast Changes There are no major forecast changes since our last quarterly report. Key Risks To Outlook Downside Risks To Real Growth Forecasts: If the situation in the eurozone continues to deteriorate without mitigating action from eurozone policymakers, a regional financial crisis akin to that seen in 2008 may result. Such an outcome would have a severe impact upon global growth, hitting the Swiss export sector and by extension, real GDP growth. A 2012 recession cannot be ruled out given the risk of a significant eurozone policy mistake in the months ahead.