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Switzerland Country Risk Report Q3 2016

  • May 2016
  • -
  • Business Monitor International
  • -
  • 47 pages

Core Views The negative side effects of rapid Swiss franc appreciation in early 2015 have largely worn off with negligible lasting damage to the economy, and Switzerland is poised for stable real GDP growth in the coming quarters. 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. The Swiss National Bank will refrain from cutting interest rates deeper into negative territory, and instead will continue to intervene in FX markets in order to prevent excessive franc appreciation. Beyond the next several years, the franc will continue to gradually depreciate from fundamentally 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.

Table Of Contents

Switzerland Country Risk Report Q3 2016
Executive Summary 5
Core Views5
Key Risks5
Chapter 1: Economic Outlook 7
SWOT Analysis 7
BMI Economic Risk Index 7
Economic Growth Outlook 8
No Lasting Damage From CHF Shock8
The negative side effects of rapid Swiss franc appreciation in 2015 have largely worn off with negligible lasting damage to the economy,
and Switzerland is poised for stable real GDP growth in the coming quarters A return to positive consumer price growth in 2016 will help
ease property market risks
GDP By Expenditure Outlook 10
TABLE: GDP GROWTH FORECASTS10
TABLE: PRIVATE CONSUMPTION FORECASTS10
TABLE: GOVERNMENT CONSUMPTION FORECASTS10
TABLE: FIXED INVESTMENT FORECASTS11
TABLE: NET EXPORTS FORECASTS11
Monetary Policy 11
Negative Rates: More Harm Than Good11
While countries that have already introduced negative interest rates may consider lowering them further, negative rates are unlikely
to be helpful in achieving central bankers' aims, and are likely to prove more counterproductive than effective for banking sector
activity
TABLE: NEGATIVE INTEREST RATES - SUMMARY12
Monetary Policy Framework 17
External Trade And Investment Outlook 18
Current Account Surplus Resilient To FX Shock18
Switzerland's economy and export sector has proved resilient to franc appreciation, and although it has peaked, the current account
surplus will remain among the largest globally as a percent of GDP in the coming years
Outlook On External Position 19
TABLE: TOP 5 GOODS IMPORTS IN 201520
TABLE: TOP 5 GOODS EXPORTS IN 201520
TABLE: CAPITAL and FINANCIAL ACCOUNT BALANCE21
Fiscal Policy And Public Debt Outlook 22
Return Of Inflation To Pressure Government Yields 22
Switzerland's exit from deflation in 2016 will put upward pressure on historically low government bond yields, although this poses no risk
to the public finances and the country remains on track for gradual public debt reduction in the years ahead
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES22
Structural Fiscal Position 23
Chapter 2: 10-Year Forecast 25
The Swiss Economy To 2025 25
Steady Growth To Prevail Over Long-Term25
We expect steady Swiss economic growth over our forecast period despite global macroeconomic headwinds We forecast
Switzerland's real economic growth to average 13% over our forecast period, supported by solid fundamentals underpinning the
domestic economy
TABLE: LONG-TERM MACROECONOMIC FORECASTS 25
Chapter 3: Political Outlook 27
SWOT Analysis 27
BMI Political Risk Index 27
Domestic Politics 28
Little Chance Of Improvement In Relations With Brussels28
The Swiss government's reluctance to extend free movement within the EU to Croatians will only serve to deepen political divides
between Bern and Brussels Meanwhile, Switzerland's June 5 referendum on universal basic income is highly unlikely to pass, but it will
help bring the idea into the mainstream across Europe
TABLE: POLITICAL OVERVIEW28
Chapter 4: Operational Risk 31
SWOT Analysis 31
Operational Risk Index 31
Operational Risk 32
TABLE: DEVELOPED STATES - LABOUR MARKET RISK32
TABLE: DEVELOPED STATES - LOGISTICS RISK36
TABLE: DEVELOPED STATES - CRIME AND SECURITY RISK39
TABLE: DEVELOPED STATES - TRADE AND INVESTMENT RISK41
Chapter 5: BMI Global Macro Outlook 43
Global Macro Outlook 43
Tentative Stability, But New Risks Emerging43
TABLE: GLOBAL ASSUMPTIONS43
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %44
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %45
TABLE: MACROECONOMIC DATA and FORECASTS47

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