UBS ups economic growth expectations

With exports on the right track, economic growth is set to continue Keystone

Switzerland's largest bank, UBS, has revised its forecast for the country's economic growth this year, raising it from two per cent to 2.3 per cent.

This content was published on March 17, 2006 minutes

The bank's economists said on Friday that the Swiss economy was growing at a fast pace thanks to a recovery seen since the middle of 2005.

The revised UBS forecast comes a day after the bank's main rival, Credit Suisse, upgraded its own outlook, marking it upwards from 1.7 per cent to 2.1 per cent.

According to UBS, exports will remain a key growth driver this year, with demand in Europe seen rising more than expected. The slowdown of the United States economy will have an impact, but not before the second half of 2006.

The bank reckons that spending on equipment is also likely to rise more than previously expected, on an improved sales and earnings situation and increasing capacity utilisation.

Construction spending will remain solid but less dynamic than in the previous two years, while the outlook for consumer sentiment is also positive. Unemployment is seen falling to 3.4 per cent in 2006 and to 3.2 per cent in 2007.

Renewed confidence

It added that greater job security and the outlook for wage increases were mainly responsible for the renewed confidence.

UBS sees industrial performance, positive consumer sentiment and the improved job market situation as pointing to "similarly strong economic momentum."

Inflation should also rise only marginally according the bank's economists, reaching 0.8 per cent this year, and one per cent in 2007.

On Thursday, the Swiss National Bank increased its key interest rate by 25 basis points, continuing its gradual monetary tightening campaign. It said that an economic growth of two per cent needed another interest environment.

It did not, however, revise its own growth forecast above two per cent.

Earlier this month, the State Secretariat for Economic Affairs in Bern said that preliminary figures showed that the economy grew by 1.9 per cent last year, confirming the economic upswing.

swissinfo with agencies

Key facts

Growth forecast 2006:

Seco: 1.8%
Swiss National Bank: 2.0%
UBS: 2.3%
Credit Suisse Group: 2.1%
Bank Julius Bär: over 2%
Institute for Business Cycle Research - KOF: 1.5%
Basel Economics: 1.8%
OECD: 1.75%

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