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Switzerland Country Risk Report Q3 2018

Switzerland Country Risk Report Q3 2018

Swiss economic activity will be supported by stronger external demand, a weaker franc and steady consumer spending in 2017 and 2018. Exports will remain a main engine of Switzerland's open economy, although consumer spending will play a larger role over the long term.

The government's robust fiscal position implies it will maintain its safe haven status and be able to step in and boost expenditures in the event that any external shock puts a sharp break on growth.

The Swiss National Bank will keep its policy rate on hold at -0.75% until 2019 when the ECB is also likely to begin raising its deposit rate, and will remain willing to intervene in FX markets in order to prevent excessive franc appreciation if the need arises. However, we forecast the franc to gradually depreciate over the long term from fundamentally overvalued levels at present.

Switzerland's current account surplus (% of GDP) will remain among the largest globally, even as it narrows gradually over the coming years.

The Swiss government's decision to pass a law that gives Swiss citizens preferential access to job openings, a response to the 2014 referendum calling for immigration quotas, will maintain the status quo in terms of bilateral treaties between Switzerland and the EU. However, a new cloud of uncertainty will hang over Switzerland's continued access to the EU's single market as the Swiss People's Party prepares to launch a new referendum targeting the freedom of movement, and the Swiss government is facing pressure from Brussels to update the terms of their bilateral relationship.

A rejection of the Swiss government's corporate tax reform in a February 2017 referendum raises headwinds to growth by creating a high degree of uncertainty for multinationals operating in the country. Tax reform will remain an imperative due to international pressure, and any future agreement will involve some trade-off between fiscal revenues and Switzerland's attractiveness as a hub for multinationals.

Although Switzerland's system of direct democracy keeps trust in the political system high, it also raises the potential that one day a directive passes which upsets the prevailing economic order.


Executive Summary
Core Views
Major Forecast Changes
Key Risks
Chapter 1: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Growth Outlook
Economy Gathering Momentum
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
External Trade And Investment Outlook
Current Account Will Narrow Over Long Term
Outlook On External Position
TABLE: TOP FIVE GOODS IMPORTS IN 2016
TABLE: TOP FIVE GOODS EXPORTS IN 2016
TABLE: CAPITAL AND FINANCIAL ACCOUNT BALANCE
TABLE: CURRENT ACCOUNT BALANCE FORECASTS
Monetary Policy
SNB Will Remain Cautious Despite Weaker CHF
Monetary Policy Framework
TABLE: MONETARY POLICY FORECASTS
Structural Fiscal Position
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES
TABLE: FISCAL AND PUBLIC DEBT FORECASTS
Currency Forecast
CHF: The Slow Grind
Chapter 2: 10-Year Forecast
The Swiss Economy To 2027
Steady Growth To Prevail Over Long-Term
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Chapter 3: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics
Shifts In Global Political Landscape Will Motivate Rethink On Foreign Policy
Chapter 4: Operational Risk
Developed States
TABLE: LABOUR MARKET RISK INDEX
TABLE: LOGISTICS RISK INDEX
TABLE: CRIME AND SECURITY RISK INDEX
TABLE: TRADE AND INVESTMENT RISK INDEX
Chapter 5: BMI Global Macro Outlook
Signs Of Weakness, But Global Expansion Broadening
TABLE: GLOBAL MACROECONOMIC FORECASTS
TABLE: DEVELOPED STATES – REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS – REAL GDP GROWTH, % y-o-y
TABLE: SWITZERLAND – MACROECONOMIC DATA & FORECASTS

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