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UBS lowers economic forecasts
UBS has revised its economic forecast for Switzerland downward due to the strong Swiss franc and the global economic slowdown. The UBS economists have lowered their growth forecast for this year from 2.7 percent to 2.0 percent, and they have dropped their forecast for 2012 from 2.2 percent to 1.3 percent. Inflation is predicted to be 0.3 percent this year, rising to 1.1 percent next year. The unemployment rate is expected to stabilize at around 3.0 percent. Monetary policy is not expected to tighten until at least the end of next year.
Despite the downward revision, the economists at UBS remain optimistic for the Swiss economy, which has performed better than many other Western industrialized economies for a number of years. One reason for this positive development, according to the UBS economists, lies in the bilateral treaties and their effect on immigration levels. The sound finances of private households, firms and the public sector the Swiss economy is in much better shape than many heavily indebted Western industrialized countries have also done their bit. The growing discrepancy between the Swiss public sector deficit and that of other Western industrialized countries has increased Switzerland's attractiveness for businesses, making it a magnet for foreign firms and skilled workers.
The strong Swiss franc will ensure that inflation remains low for the time being, as it reduces prices on imported goods. In the long term, however, UBS economists see a significant risk of inflation due to an expansionary monetary policy and, in particular, the renewed intervention by the Swiss National Bank to influence exchange rates.
Daniel Kalt, Chief Economist Switzerland
Tel. +41 44 234 25 60
Caesar Lack, Wealth Management Research
Tel. +41 44 234 44 13
UBS publications and forecasts for Switzerland: www.ubs.com/wmr-swiss-research