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Switzerland Business Forecast Report Q2 2014

  • January 2014
  • -
  • Business Monitor International
  • -
  • 41 pages

Core Views

Switzerland’s growth trajectory over the medium term will be increasingly
powered by consumer 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.
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 this wave.

Key Risks To Outlook

Upside Risks To Real Growth Forecasts: With the eurozone crisis on
the backburner, the risks to our forecasts have tilted to the upside.
The recovery in international trade and stabilisation in the eurozone
could precipitate a stronger acceleration in Swiss growth than we
currently anticipate.

Table Of Contents

Switzerland Business Forecast Report Q2 2014
Executive Summary 5
Core Views 5
Major Forecast Changes 5
Key Risks To Outlook 5
Chapter 1: Political Outlook 7
SWOT Analysis 7
BMI Political Risk Ratings 7
Domestic Politics 8
Political Threats To Swiss Competitiveness 8
Having been a major beneficiary of the last wave of globalisation, Switzerland's position as a highly competitive economy are coming
under threat from both internal and external political pressures Indeed, an upcoming vote on whether to introduce immigration quotas,
coupled with the ongoing transition towards tighter regulation of the banking industry and executive pay, risk denting the appeal of
Switzerland's business environment
TABLE: Political Overview 8
Chapter 2: Economic Outlook 11
SWOT Analysis 11
BMI Economic Risk Ratings 11
Economic Activity 12
Outperforming The Eurozone 12
The Swiss economy is on track to once again outperform the eurozone in 2014 The combination of a robust current account surplus
which supports growth when external demand is strong, coupled with a healthy increase in consumer spending, will translate into a
2 0% expansion in real GDP this year and an average 1 6% rate of growth over the course of 2014-2018 Moreover, assuming that the
eurozone recovery secures a firmer footing in 2014, the risks to our Swiss economic growth forecasts will lie to the upside
Balance of Payments 14
Surplus Will Remain Strong 14
Switzerland's current account will continue to post large surpluses over the medium term, underpinned by a robust surplus in the
goods and services accounts This will help to drive up economic growth as international trade recovers, as well as keeping a lid on
unemployment That said, we expect to see some moderation in the size of the surplus relative to the economy, given our view that
consumer spending and fixed investment will pick up over the medium term
Monetary Policy 15
Monetary Policy Will Remain Loose 15
In contrast to the US Federal Reserve and Bank of England which have loosened monetary policy to combat tight credit conditions, the
Swiss National Bank has had to loosen policy in response to a surge in capital inflows Even though we expect pressure from foreign
capital to subside as the eurozone recovery shifts up a gear, we expect the SNB to continue targeting rates at zero and will not drop its
pledge to prevent a destabilising appreciation of the franc by purchasing foreign currency
Exchange Rate Policy 16
CHF Will Weaken In 2014 16
Having strained against the tide of foreign capital inflows in recent years, we believe that the pressure on the Swiss National Bank
to prevent further franc appreciation will ease in 2014 With the eurozone crisis shifting from an acute to a more chronic phase, the
stabilisation in demand will go hand in hand with an improvement in investor sentiment which will reduce demand for safe haven assets
As such, we expect the Swiss franc to depreciate gradually over the medium term, with strong domestic economic growth and a large
current account surplus preventing a precipitous currency correction
TABLE: Currency Forecast 17
Business Monitor International Ltd www businessmonitor com 3
Banking Sector 18
Banking Sector: Robust Expansion Ahead 18
The Swiss banking sector continues to expand at a time when eurozone banks still face deleveraging pressures Asset growth is in
line with the rate of growth in the broader economy and we believe that total industry assets can be sustained at around 500% of
Chapter 3: 10-Year Forecast 21
The Swiss Economy To 2023 21
Steady Growth To Prevail Over Long-Term 21
We expect steady Swiss economic growth over our forecast period despite the global macroeconomic headwinds We forecast
Switzerland's real economic growth to average 1 8% over our forecast period on account of the solid fundamentals underpinning the
domestic economy
TABLE: Long -Term Macroeconomic Forecasts 21
Chapter 4: Business Environment 23
SWOT Analysis 23
BMI Business Environment Risk Ratings 23
Business Environment Outlook 24
Institutions 24
Infrastructure 27
Market Orientation 29
Operational Risk 30
Pharmaceuticals 31
In addition to increasing health insurance premiums to meet the demands for hospital care and medicines, the Swiss government
will need to realise efficiencies in the healthcare sector in order to maintain high levels of healthcare provision and meet the growing
demands and changes in the types of healthcare that patients need According to OECD figures, the Swiss visit doctors as often as
people in comparable countries (around four times a year) and the average length of a hospital stay for acute care stands at just under
eight days, compared to under five days in Sweden and under six days in the Netherlands
Chapter 5: Key Sectors 31
TABLE: Pharmaceutical Sales , Historical Data and Forecasts 32
TABLE: Patented Drug Market Indicators , Historical Data and Forecasts 33
TABLE: Prescription Drug Market Indicators , Historical Data and Forecasts 33
TABLE: Generic Drug Market Indicators , Historical Data and Forecasts 34
TABLE: OTC Medicine Market Indicators , Historical Data and Forecasts 35
Other Key Sectors 37
table : Telecoms Sector Key Indicators 37
table : Autos Sector Key Indicators 37
table : Infrastructure Sector Key Indicators 37
Chapter 6: BMI Global Assumptions 39
Global Outlook 39
Momentum To Continue In H114 39
Table : Global Assumptions 39
Table: Developed States, Real GDP GrowtH, % 40
Table : Emerging Markets , Real GDP Growth , % 41

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