Economic Environment and Outlook

Basel, Q4-2019 (October 2019)


The Swiss economy is likely to slow down this year, the GDP will probably grow + 1,2 % but it will recover slightly in 2020. A weak external demand will continue to affect the economy: the slump in German manufacturing is dragging down growth across Europe and Switzerland. Intensification of global trade tensions and a disruptive Brexit could also affect negatively the economy. The Swiss franc remains a concern, the central bank is trying to mitigate the effects of a strong currency. Another concern is the real estate sector and mortgage loans.


The US economy will probably be resilient in the fourth quarter of 2019. Consumption remains positive, the labour market conditions remain strong, and the savings rate is still improving. House prices are stable and residential investment should remain buoyant. Short-term rates could go even lower in 2019, growth forecasts are now more cautious. The corporate sector remains fairly competitive, earnings are expected to remain robust. Weaker European growth will be a growing concern for export-oriented companies. There are more positive than negative elements to this scenario but on the other hand the administration's ideas on various domestic issues and the Middle- and Far East have the potential to negatively impact growth and markets. In spite of some success in negotiations between the United States and China, the impact of the ongoing trade war should not be underestimated.


Industrial production is somewhat subdued. GDP growth rates are not improving, some countries are still challenged by public debt financing. Germany may see no growth in 2019, as manufacturing continue to slump. Exports and services decline raise pressure on the government to add fiscal stimulus. The ECB is reassessing its monetary policy, the era of quantitative tightening has proved to be short lived. Weaker economic growth on the continent will allow central banks to keep interest rates at very low levels - markets are now expecting a more generous monetary policy. Manufacturing is weak, inflation remains low. In the UK, the Bank of England might need to contemplate a new monetary strategy for post-Brexit Britain, as negotiators remain engaged in a complex negotiation process that will stretch into 2019. The Supreme Court ruling that the Prime-Minister’s advice to The Queen to suspend parliament was unlawful will shape the course of Brexit, the UK leaving Europe Union without a deal is now less likely.


The government in Japan is pushing for more growth and the central bank, with its negative interest rate policy, has pledged to expand asset purchases, buying bonds and treasury bills. The public debt is already very high. The economy is stalling, private consumption and public investment weaker. A more competitive yen eases corporate pessimism. In China, exports are less vigorous than expected. The economy and domestic demand remain stable.  In India, the new government continues to implement policy changes designed to improve growth.


CHFStable, due to its role as a safe haven currency. The SNB will continue to sell Swiss francs to avoid a further appreciation.
EUROCould weaken.
JPYTo remain stable, likely to soften again if there is more central bank intervention.
GoldWill recover due to continuing economic and geo-political uncertainties.

Financial Markets

  Switzerland Europe UK USA Japan
Interest Rateslowlowlowlowlow
Stock Marketsvolatilevolatilevolatilevolatilevolatile


The aforementioned Economic Environment and Outlook shall not constitute a recommendation or an investment advice. It is not the result of any financial analysis and the “Directives on the Independence of Financial Research” issued by Swiss Bankers Association does therefore not apply.