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UBS outlook Switzerland 1st quarter 2012 - Robust domestic market helps avert a downturn

Zurich/Basel Media Releases Switzerland


Export-oriented companies and the industrial sector have been hit particularly hard by the global economic slowdown. But a robust domestic market is preventing the Swiss economy from going down the same path as the euro area. Even so, economic conditions in both sectors deteriorated in the fourth quarter of 2011.

Zurich/Basel, 15 February 2012 – Economic growth in Switzerland has slowed considerably. The UBS GDP indicator shows that in the fourth quarter of last year the economy grew at a pace of 1.1% year-on-year. A further slowing is expected for the current quarter, with growth falling to 0.8%. For 2012 as a whole, the economists at UBS Wealth Management Research expect economic growth to be modestly positive at 0.4%. The GDP indicator is based on the results of a survey among 240 manufacturing companies.

The latest results of the survey conducted by UBS show that export-oriented companies and the industrial sector have been hit particularly hard by the global economic slowdown and the strong franc. Meanwhile, falling consumer prices are increasing the purchasing power of consumers. Along with these lower prices, record-low interest rates for the foreseeable future and continuing immigration into Switzerland are boosting consumption, construction and property prices. As a result, the Swiss economy should once again significantly outperform the European economy this year.

Falling import prices are keeping inflationary pressure very low at the moment. For this reason, and because of the strong franc, the Swiss National Bank is likely to continue its expansive monetary policy. We expect the central bank to keep interest rates on hold until at least 2014. This means that the accommodative monetary policy should continue to have a stimulating effect on the domestic economy and real estate prices for quite some time.

The strong franc is weighing heavily on export-oriented Swiss industry, raising fears of deindustrialization. However, historically there has always been a movement of jobs away from the manufacturing sector and into the services sector. The franc's weakness in the period before the crisis slowed the trend for a few years, but the strong franc is accelerating the process. Monetary policy cannot stave off structural change indefinitely; it can only slow the pace of this change.

On a regional level, the latest edition of UBS outlook Switzerland also shows which cantons are well placed to compete internationally, and which ones face problems. Here, too, the currency situation is having a significant effect.








Daniel Kalt, Chief Economist Switzerland
Tel. +41 44 234 25 60







Caesar Lack, Wealth Management Research
Tel. +41 44 234 44 13







Sibille Duss, Wealth Management Research
Tel. +41 44 235 69 54

Stefan R. Meyer, UBS Wealth Management Research
Tel. +41 44 235 38 26







UBS outlook Switzerland:
UBS publications and projections for Switzerland:





UBS Swiss economic forecasts

UBS Business Cycle Indicator and gross domestic product
(Change yoy in %)

UBS Business Cycle Indicator and gross domestic product
UBS Business Cycle Indicator