• Switzerland's news in English

Swiss economy to avoid recession: economists

Malcolm Curtis · 16 Jan 2015, 10:42

Published: 16 Jan 2015 10:42 GMT+01:00

Facebook Twitter Google+ reddit

The impact of the decision, which has sent the franc soaring to near parity with the euro from 83 cents, will cut expected economic growth to 0.5 percent for 2015, UBS Wealth Management said in a report.

That’s down from the previously forecast 1.8 percent and considerably below the 1.9 to two percent rate estimated for 2014.

The UBS unit said it expects Switzerland’s Gross Domestic Product to expand by only 1.1 percent in 2016 versus the 1.7 percent rate forecast before the Swiss National Bank abandoned its efforts, undertaken for more than three years, to prevent the franc from appreciating in value.

Swiss exporters will feel the pain worst, along with sectors such as the tourism industry and retailers near the French, German and Italian borders.

The low value of the euro is expected to further boost cross-border shopping by Swiss consumers with higher purchasing power because of the franc.

Economists say the eurozone’s economy is expected to pick up in the second half of this year, which should help Swiss exporters.

But UBS said it expects overall exports to dip by one percent this year compared to 2014.

Research group BAK Basel Economics predicts slower economic growth as well as a jump in unemployment to between 3.6 percent and 3.8 percent next year, compared to a previously forecast rate of 3.1 percent.

The group said it is unlikely that the euro will return to a level of 1.20 francs in the next couple of years and it has based its forecasts on a rate of 1.05 francs.

The biggest losers from the strong franc will be the machine industry, mechanical engineering, automotive suppliers, chemical, pharmaceutical, textile and hotel industries, the Zurich economic institute KOF said.

Some industries will gain from the cost reduction from goods imported from the euro area, the institute, attached to the federal institute of technology in Zurich (ETH), said.

Economists at KOF, like others in Switzerland, said they were surprised by the SNB’s move.

Story continues below…

The institute echoed the views of other observers in noting that the decision threatens the central bank’s credibility and trust.

In the eyes of many market participants the SNB broke an “implicit promise” after stating that it would defend the 1.20-franc euro floor introduced in September 2011, KOF said in a report.

By choosing to scrap this exchange rate at a time when the franc was under pressure the central bank gives the impression of having yielded to outside forces, it said.

Many economists also highlighted the fact that Switzerland is now facing deflation or “negative inflation”.

Mortgage rates, already at historic lows, are expected to fall even further after the SNB cut its reference rate to minus 0.75 percent from minus 0.25 percent for financial institutions.

For more news from Switzerland, join us on Facebook and Twitter.

Malcolm Curtis (news@thelocal.ch)

Facebook Twitter Google+ reddit

Your comments about this article

Today's headlines
Swiss woman wins headscarf court battle
Photo: Jack Guez / AFP file picture

A Swiss court has ruled against a company that fired a longtime employee after she began wearing the Muslim headscarf, marking one of the first such rulings in Switzerland, media reported Sunday.

Montreux throws hat in Olympic rings
Could Montreux host the 2026 Games? Photo: Ivo Scholz/Swiss Tourism

Montreux is to put itself forward as the host city for the 2026 winter Olympics as part of a potential bid by the cantons of Valais and Vaud.

Geneva car share scheme could help reduce city traffic
Catch a Car is aimed at short hops within a city. Photo: Catch a Car

Catch a Car, already in Basel, launches in Geneva next month.

Swiss women will ‘work for free’ for the rest of year
Female employees in Switzerland earn 19.3 percent less than their male colleagues. File photo: Randy Kashka

Switzerland's gender pay gap means from today, Friday October 21st, women in the country will effectively be working for free for the rest of 2016.

Swiss luxury watches stolen in Paris raid
Police outside the Girard-Perregaux watch store on Thursday. Photo: Bertrand Guay/AFP

The 10 Girard-Perregaux watches are worth half a million euros in total.

Brother-in-law arrested over murder of Swiss teacher
The victim worked in a school in Stabio, near the town of Mendrisio. Photo: Oliver Graf

The primary school teacher was found dead in Ticino earlier this week.

Inside Switzerland’s largest nuclear bunker – 40 years on
Designed to house 20,000 people, the bunker was built in and over two motorway tunnels. Photo: Unterirdisch Ueberleben

The Local takes a tour of the Sonnenberg bunker in Lucerne, opened 40 years ago at the height of the Cold War.

Ten Swiss ski resorts named most expensive in Europe
File photo: Renato Bagattini/Swiss Tourism

Skiers in Switzerland pay the highest prices for their ski passes of anywhere in Europe, according to research.

Eco group fights Bern over wind farm plans
There are currently more than 30 wind farms in Switzerland. Photo: Alpiq

Wind turbines are “gigantic and destructive” machines, says Paysage Libre Suisse.

Vegan wins battle to be accepted by Swiss army
Antoni Da Campo will now carry out his military service. Photo: Antoni Da Campo

A Swiss man who was told he would not be accepted for military service because of his strict veganism has finally succeeded in making the army change its mind.

Sponsored Article
How to vote absentee from abroad in the US elections
Photo: Richard Juilliard/AFP
Man makes Geneva airport bomb threat ‘for a joke’
Sponsored Article
Last chance to vote absentee in the US elections
Photo: AFP
Solar Impulse team reveals plans for unmanned plane
File photo: Martin Abegglen
Swiss to vote on passport rules for 3rd gen foreigners
Sponsored Article
How to vote absentee from abroad in the US elections
Photo: AFP
Swiss wingsuit hotspot Lauterbrunnen won’t impose ban
Photo: Swiss Tourism
Six reasons Switzerland isn’t as boring as you might think
Photo: Swiss Tourism
Report: Switzerland one of world’s best places for girls
Photo: The Local
Thief returns Swiss cow bells worth thousands
File photo: Wikimedia Commons
One in three rapists isn’t locked up: statistics
Photo: activistin.ch
Tampon-tax protest turns Zurich fountains red
Photo: AFP
Geneva police to lift ban on bearded officers
Photo: Marcel Gillieron/AFP
Suicide chef’s restaurant keeps Michelin stars
Photo: Lara de Salis
11 things the Swiss get tired of hearing abroad
Photo:  Ivo Scholz/Swiss-image.ch
Survey: expats in Switzerland have money but few friends
Photo: AFP
Swiss press criticize Bern’s 'capitulation' on immigration
Photo: Jura Trois Lacs tourism
German ex-policeman is Swiss city’s new hermit
Photo: Dmitry A. Mottl
Ticino votes to favour local workers over foreigners
Photo: file
Some deodorants could cause breast cancer: Swiss study
Photo: Royal Savoy
In pictures: Inside the latest Swiss luxury hotel
Photo: AFP
Geneva airport bomb hoaxer faces 90,000-franc bill
Photo: Schaffhausen police
Mother leaves toddler son alone in car to go clubbing
Photo: Fabrice Coffrini/AFP
Swiss populist attacked by knife-wielding pensioner
Photo: File
Bern argues over passports for 3rd generation foreigners
Photo: Broad Bean Media
Muslim pupils must shake hands – ‘no ifs and buts’
jobs available