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Switzerland Country Risk Report Q1 2016

Switzerland Country Risk Report Q1 2016

Core Views

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, %

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