The revaluation of the Swiss franc reduces GDP growth prospects for 2015 and 2016

Bern, 19.03.2015 - Economic forecasts from the Federal Government’s Expert Group – Spring 2015*. Since the decision of the Swiss National Bank (SNB) taken on 15 January to abolish the exchange rate floor of 1.20 franc to 1 euro and the subsequent appreciation of the Swiss franc, the economic indicators for Switzerland have worsened. Nevertheless, although the appreciation of the Swiss currency will have a detrimental impact on the competitiveness of Swiss companies, the brighter economic prospects for Europe and the strengthening upturn in the USA should alleviate these negative effects. Seen from the today’s viewpoint Switzerland may experience a temporary economic slowdown. However, in the current environment there are no signs of any sharp downturn – with a marked fall in economic activity and sharp rise in unemployment. Consequently, growth in GDP for 2015 and 2016 is expected to be +0.9% and +1.8% respectively, with a slight increase in the unemployment rate. Although the economy will experience a moderate general slowdown, certain sectors or individual companies are currently faced with severe competitive pressures.

International economy
Positive news is coming from the US. After a negative 1st quarter in 2014, economic growth clearly accelerated in the second half of the year while in February 2015, the unemployment rate was at 5.5% (seasonally adjusted), its lowest level since the outbreak of the financial crisis. Growth is forecast to rise from 2.4% in 2014 to 3.2% in the current year.

The economic recovery in the Euro area also gained momentum in the second half of 2014, primarily thanks to the stimulus provided by private consumption. There are also increasing signs of a slight acceleration in the coming quarters. For example the current sentiment indicators for the German economy, which had weakened a little further in mid-2014, are beginning to improve. Other countries such as Spain can also boast brighter prospects. The outlook in some countries in the Euro area nevertheless remains more subdued against a backdrop of sluggish debt relief and reform efforts and difficult labour market conditions. Uncertainty concerning future developments in Greece also remains. Overall, the next two years would seem to promise slightly higher growth in the Euro area than previously expected (2015: +1.4%, 2016: 1.7%).

A somewhat uneven picture emerges in the other regions of the world. In the final quarter of 2014, the Japanese economy once again grew having shrunk for two successive quarters following the increase in value added tax implemented in the spring. As a result of the expansionary monetary and fiscal policy and low oil prices, continued moderate growth is expected during the coming quarters (+0.8% in 2015). While China proved to be economically robust in 2014, the trend growth rate of the economy has declined; the forecast growth of roughly 7% should be understood in the light of the level of development already reached by this country. The economic situation in Russia, on the other hand, is drastic. The sharp decline in oil prices, political uncertainties and the economic sanctions imposed on the country (Ukraine crisis) are driving Russia into a severe recession (with a decline in GDP of -3% to
-3.5%). The short-term economic prospects for Brazil are also somewhat subdued whereas the outlook for India has brightened.

The significant fall in oil prices since mid-2014 is having a beneficial effect on disposable income and on production costs in the oil-importing countries. These effects should ultimately be a stimulus for the world economy. At the same time, the fall in oil prices has a damping effect on inflation. This could exacerbate existing risks of deflation – which are unevenly distributed across the Euro area countries – should this have subsequent effects on prices and wages.

Economic forecast for Switzerland
In 2014, the Swiss economy created approximately 33’000 jobs in full-time equivalents and annual GDP growth reached 2.0%. While domestic demand has been one of the main driving forces behind GDP growth since 2010, this was no longer the case in 2014. Over the past year, the balance of trade in goods and services accounted for two thirds of the 2.0% GDP growth in 2014.

The short-term indicators for several European countries improved after the end of the summer 2014 and have maintained this trend during the early months of 2015. This was not, however, the case in Switzerland: in the wake of the decision of the Swiss National Bank (SNB) taken on 15 January to abolish the exchange rate floor of 1.20 Swiss franc to 1 euro and the subsequent appreciation of the Swiss franc, the economic indicators for Switzerland have deteriorated (see, for example, the results of the KOF economic surveys).

The real exchange rate index for the Swiss franc (weighted for exports to 40 trade partners) increased by 7.5% in January 2015 in comparison to December 2014. From a historical standpoint, this is the largest single-month growth ever recorded for this index. Nevertheless, the Swiss franc has since depreciated in relation to the US dollar, the pound sterling and other currencies outside the Euro area. The appreciation of the Swiss franc in relation to the euro has continued to be considerable up to mid-March (about 10%).

Despite the unusual situation facing the Swiss economy during the 1st quarter of 2015 caused by the major currency shock, at this point in time the Expert Group does not anticipate a fall in economic activity over a period of several quarters, accompanied by a marked rise in unemployment. The GDP growth forecasts at constant prices have, however, been revised downwards considerably. The Swiss economy should experience GDP growth of 0.9% in 2015 (growth of 2.1% had been forecast in December 2014) and 1.8% in 2016 (forecast of 2.4% in December 2014). The improving economic prospects in the Euro area and the continued growth of the resident population in Switzerland that is expected in light of a positive net migration will play an important role in this respect and are likely to limit the weakening in growth. While the balance of trade provided a positive stimulus for growth in 2014, a negative contribution is expected for 2015. Independently of the monetary shock, investments in the construction sector are forecast to fall by 1.5% in 2015 before stagnating in 2016. The increase in end consumer domestic demand should nevertheless provide a stimulus to GDP growth in both 2015 and 2016.

The seasonally adjusted unemployment rate increased for the first time since spring 2013, with approximately 1’500 additional people registered as unemployed in February 2015. The Federal Government’s Expert Group is now anticipating a further slight increase in the unemployment rate in 2015 which is expected to settle at an annual average rate of 3.3% (3.0% forecast in December 2014) and 3.4% in 2016 (instead of 2.8% forecast in December 2014).

The development of the foreign price components of the consumer price index and consequently consumer prices in Switzerland had already been fallen between October 2011 and October 2013, although oil prices were rising during that period. Since September 2014, consumer prices have again fallen. In January and February 2015, the drop in the consumer price index (compared with the corresponding months last year) was measured at -0.5% and -0.8%. This time, the main reason for inflation being in negative territory has been the lower prices for oil products. In addition to the impact of the fall in oil prices, the appreciation of the Swiss franc will also have a significant effect on inflation in 2015. The Federal Government’s Expert Group nevertheless expects to see positive inflation again from 2016. A fall of 1.0% in consumer prices is forecast for 2015 as a whole, followed by an increase in prices of +0.3% for 2016.

Economic risks
Some parts of the export and tourism industry are already suffering from the high value of the Swiss franc. Any new upward surges in the value of the Swiss franc would have serious consequences for these sectors.

The weakening of the Swiss economy could be significantly exacerbated by economic setbacks especially in the Euro area. Weakening of development in the emerging markets which have played an increasingly important role for Swiss exporters over recent years, would lead to a deterioration in the situation in Switzerland. However, the development of these factors could also be more positive than expected. For example, in the event of a markedly more buoyant recovery by the Euro zone, the negative effects of the franc on the economy could be partly offset.

The uncertain political conditions (in particular with regard to relations with the EU) also continue to pose a significant pool of risks for the Swiss economy. The calming trends on the real estate market have continued at least but the all-clear in relation to the potential threat of overheating can still not be given.

The abolition of the Swiss franc exchange rate floor against the euro was accompanied by a fall in the three-month Libor rate to -0.75%. This decision has had consequences for the entire interest rate curve most of which, having already reached record lows, came close to or fell below zero (at least temporarily). This change in the monetary conditions creates a new environment, the consequences of which are still difficult to assess.

* The Federal Government’s Expert Group on Economic Forecasts publishes forecasts for Swiss economic development on a quarterly basis. This media release comments on the current forecast of March 2015. The current edition of “Economic Trends” (“Konjunkturtendenzen”), a quarterly publication from the SECO, integrates these forecasts and goes into more detail on other aspects of the current economic development. This publication appears in printed form as an appendix to the magazine “Die Volkswirtschaft” ( It is also available free of charge in PDF format on the Internet (

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Last modification 14.05.2024

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