Economic Environment and Outlook

Basel, Q4-2018 (October 2018)


Despite challenges confronted by the Swiss economy, growth is resilient and the outlook reasonably positive, with a projected increase of 2.4%. The strength of the Swiss franc remains a concern, although recent weakness should bring some relief to the corporate sector. Lower costs related to oil and other commodities also support companies. Domestic consumption should be fairly stable with unemployment low. With low inflation expected through 2018, the SNB will maintain its accommodating monetary policy. Increasing growth in Europe should have a positive impact.


The US economy will continue to expand in the fourth quarter of 2018. Consumption remains positive, labour market conditions remain strong, and the savings rate is improving. House prices are stable and residential investment should remain buoyant. Short-term rates will continue to rise in 2018, the Fed's new chairman Jay Powell raised forecasts as growth strengthens. The problems of the financial sector are not over, but bank losses are decreasing. The corporate sector remains fairly competitive, earnings are expected to be robust. Higher European growth will help 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. The impact of punitive tariffs announced by Donald Trump to tax Chinese exports to the US should not be underestimated.


Industrial production is picking up on the Continent. GDP growth rates are improving, even though some countries are still challenged by public debt financing. In the next few months the ECB will start to reduce quantitative easing. Stronger economic growth on the Continent will oblige central banks to raise interest rates - markets will take this more seriously towards the end of the year. Manufacturing is growing and 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: Great Britain now looks more isolated with plans to live with a no-deal outcome.


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 expected to continue to recover with private consumption and public investment fuelling growth. 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 and the relative good performance of the Swiss economy. The SNB will continue to sell Swiss francs to avoid a further appreciation.
USDCould 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 Rateslowlowrisingrisinglow
Bondsunder pressureunder pressureunder pressureunder pressurestable
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.