Switzerland Country Risk Report Q1 2016
Switzerland's growth trajectory over the medium term will be increasingly powered by consumer spending.
The government's robust fiscal position implies it will be able to step in and boost growth in the event that any external shock puts a sharp break on Swiss growth.
Although the Swiss National Bank removed its CHF1.20/EUR floor on January 15, it will continue to intervene in FX markets in order to prevent excessive franc appreciation. Beyond the next several quarters, the franc will begin to gradually depreciate from overvalued levels.
A narrowing of Switzerland's large current account surplus will gather steam in 2016, but the surplus will remain sizeable over the coming years.
Major Forecast Changes
We have revised up our 2015 and 2016 real GDP growth forecast to 1.3% and 1.6% respectively, from 0.9% and 1.5% previously, as the economy has proved more resilient than initially anticipated to rapid franc appreciation.
- Executive Summary
- Core Views
- Major Forecast Changes
- Key Risks
- Chapter 1: Political Outlook
- SWOT Analysis
- BMI Political Risk Index
- Domestic Politics
- Shift Right In Election Keeps EU Relations In Question
- The EU's migrant crisis has contributed to another strong showing for the Swiss People's Party in the October 18 general election, and
- while not our core scenario, increases the chances of a rupture in relations with the EU and a loss of free market access over proposed
- immigration quotas.
- Chapter 2: Economic Outlook
- SWOT Analysis
- BMI Economic Risk Index
- Economic Activity
- Rebounding From Temporary Lull
- Rapid appreciation of the Swiss franc in January has weighed on employment levels in Switzerland's highly open economy, but overall
- economic activity has proved resilient and is poised for solid growth in the coming quarters.
- GDP By Expenditure Outlook
- TABLE: REAL GDP FORECASTS
- TABLE: PRIVATE CONSUMPTION FORECASTS
- TABLE: PUBLIC CONSUMPTION FORECASTS
- TABLE: FIXED INVESTMENT FORECASTS
- TABLE: NET EXPORT FORECASTS
- External Trade And Investment
- Trade Surplus Peaking In 2015
- Switzerland's trade surplus will hit a record high of 8.2% of GDP in 2015, but this is largely owing to commodity price declines. Our core
- scenario remains a slow but steady rebalancing in the coming years away from net export led growth, entailing a gradual narrowing of
- external surpluses.
- Outlook On External Position
- TABLE: CURRENT ACCOUNT FORECASTS
- TABLE: TOP 5 EXPORT & IMPORT DESTINATIONS
- Monetary Policy
- SNB Running Out Of Options, Will Continue FX Interventions
- While all options remain on the table, we do not expect the Swiss National Bank to cut interest rates deeper into negative territory in
- response to further stimulus from the European Central Bank, and instead expect continued intervention in the FX markets to prevent
- franc appreciation.
- TABLE: MONETARY POLICY FORECASTS
- Banking Sector
- Negative Rates Posing Bubble Risks
- We maintain our positive long-term view on the Swiss banking sector's growth prospects, in line with a healthy macroeconomic outlook.
- The continued inflow of deposits - both domestic and foreign - will allow the industry to continue ramping up credit .
- Chapter 3: 10-Year Forecast
- The Swiss Economy To 2024
- Steady Growth To Prevail Over Long-Term
- We expect steady Swiss economic growth over our forecast period despite global macroeconomic headwinds. We forecast Switzerland's rea l economic growth to average 1.3% over our forecast period, supported by solid fundamentals underpinning the domestic economy.
- TABLE: LONG-TERM MACROECONOMIC FORECASTS (SWITZERLAND 2014-2024)
- Chapter 4: Operational Risk
- SWOT Analysis
- Operational Risk Index
- Operational Risk
- Labour Market Risk
- TABLE: DEVELOPED STATES - LABOUR MARKET RISK
- Logistics Risk
- TABLE: DEVELOPED STATES - LOGISTICS RISK
- Crime And Security Risk
- TABLE: DEVELOPED STATES - CRIME AND SECURITY RISK
- Trade And Investment Risk
- TABLE: DEVELOPED STATES - TRADE AND INVESTMENT RISK
- Chapter 5:BMI Global Macro Outlook
- Global Outlook
- Exit The Dragon
- TABLE: GLOBAL ASSUMPTIONS
- TABLE: DEVELOPED STATES, REAL GDP GROWTH, %
- TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
- TABLE: EMERGING MARKETS, REAL GDP GROWTH, %