Steady Growth Ahead
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 keep 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.
Major Forecast Changes
No major forecast changes
A sharp selloff in global equities at the start of 2016 reflects, among other things, mounting concerns over global growth prospects, further commodity price declines, risks of a Chinese hard landing, and waning confidence in the ability of central banks to boost growth. While so far there is little evidence of a concurrent slowdown in real economic activity, risks of contagion from financial markets to sentiment and production have grown steadily. Switzerland, being a highly open economy, remains exposed to any further downturn in demand from developed and emerging market trading partners.
|e/f = BMI estimate/forecast; Source: National Sources/BMI|
|Real GDP growth, % y-o-y||1.9||0.9||1.5||1.7|
|Nominal GDP, USDbn||701.7||664.5||629.3||642.9|
|Consumer price inflation, % y-o-y, eop||-0.3||-1.3||0.6||1.0|
|Exchange rate CHF/USD, eop||0.99||1.00||1.02||1.00|
|Budget balance, % of GDP||-0.1e||-0.1e||-0.1||-0.1|
|Current account balance, % of GDP||8.8||11.4||9.8||8.8|
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