The abrupt rise of the Swiss franc following the Swiss National Bank's (SNB) decision to unpeg the franc from the euro minimum exchange rate in mid-January changed the conditions for conducting business in Switzerland dramatically. Hopes that the EUR/CHF exchange rate would depreciate toward 1.10 have faded due to ongoing crises in Europe. The latest shift toward parity has boosted uncertainty regarding the development of the Swiss economy significantly.

UBS economists are expecting marked deceleration in real economic growth to 0.5%, meaning the Swiss economy will narrowly scrape past recession.

Beating back the regulation jungle

Given the difficult situation regarding the interest and exchange rates, Switzerland should reinforce those location factors that can be influenced immediately and directly. Crucial among these are regulatory efficiency and business-friendliness. "This glut of regulations not only pushes up costs, it often inhibits innovation and is therefore counterproductive," said Lukas Gähwiler, UBS, Head Switzerland, at a media breakfast in Zurich. He suggests taking into account more novel solutions, "Considering how successful the debt ceiling has been, why not introduce a regulation ceiling too?"

UBS economists note in the latest edition of UBS Outlook Schweiz that Switzerland has continuously lost ground internationally over the last few years due to increasing regulations. "Businesses' capacity to act is continually limited by an ever-tightening web of rules and regulations. This has crippled innovation and entrepreneurship," said Daniel Kalt, UBS Chief Economist Switzerland.

The number of regulations has risen measurably. For example: The scope of the legal corpus at federal level alone has swelled by 12,000 pages in the last 10 years and now comprises 66,000 pages of laws and directives. In the record-topping year of 2012, an average of 140 pages of new laws and directives were enacted each week. Entrepreneurs also cited inefficient government bureaucracy as one of the biggest obstacles to their businesses in the World Economic Forum Global Competitiveness Report in 2014.

Source: Seco, UBS

In developing the UBS CIO WM economic forecasts, UBS CIO WM economists worked in collaboration with economists employed by UBS Investment Research. Forecasts and estimates are current only as of the date of this publication and may change without notice.

Links

UBS outlook Switzerland: www.ubs.com/outlook-ch-en
UBS publications and forecasts for Switzerland: www.ubs.com/investmentviews

UBS AG

Media contact

Daniel Kalt, Regional CIO Switzerland
Phone +41-44-234 25 60, daniel.kalt@ubs.com

Sibille Duss, UBS Chief Investment Office WM
Phone +41-44-235 69 54, sibille.duss@ubs.com

Dominik Studer, UBS Chief Investment Office WM
Phone +41-44-234 81 74, dominik.studer@ubs.com