Top banks forecast solid growth in 2006

The Swiss economy is "on course for a solid period of growth" Keystone

Switzerland's leading banks, UBS and Credit Suisse, are optimistic about the prospects for domestic economic growth in 2006.

In their outlooks for the first quarter, the banks said business confidence was high and the economy was set to expand.

A further sign that the economy was on track came from the KOF Institute for Business Cycle Research.

KOF’s monthly indicator, which points to likely economic performance in about six months’ time, reached its highest level since August 2000.

UBS said on Friday that most sectors of the Swiss economy had enjoyed a good year in 2005, with increased sales and earnings, particularly in banking and pharmaceuticals.

The results of a survey of Swiss businesses showed that 2006 was expected to be nearly as good.

Rival Credit Suisse forecast that the global economy would continue its “highly satisfactory” growth trend into 2006.

It said this would also be reflected in Switzerland where the economy was “on course for a solid period of growth”.

Given low inflation the Swiss National Bank (SNB) was only expected to raise interest rates twice in the coming year, which would not dampen growth.

Business survey

UBS said it had carried out a broad-based survey of more than 4,700 companies, which found that overall sales growth and earnings were expected to increase in 2006.

“Despite question marks over the global economy, interest rates and currency trends, most companies see themselves positioned well enough in their markets to be able to continue expanding,” the number one Swiss bank said.

But UBS pointed out that the picture varied from sector to sector, with 16 out of 27 branches predicting falling sales and volume growth.

This would be partially offset by a recovery in the telecommunications, automobile and retail industries, it said.

The pharmaceutical and financial sectors posted the highest volume of growth in 2005 and were expected to top the growth table again this year.

Assessments of sales and earnings were positive the larger the company involved, UBS said. But it added that bigger firms faced tougher price pressure, mainly because they were competing on international and not just domestic markets.

More jobs

UBS said that perhaps the clearest sign that the strong economy was “not simply a flash in the pan” was the growing need for new labour.

While recruitment was not taking place on a large scale, the survey showed the vast majority of sectors had taken on extra staff. This trend was expected to accelerate in 2006.

The greatest need for staff was registered in financial services, IT, real estate, electrical engineering and pharmaceuticals.

On the other hand, job cuts were to be expected in the media, tourism and retail trade branches, UBS said.

swissinfo with agencies

Key facts

The UBS survey looked at more than 4,700 companies in 27 main sectors and 97 sub-sectors.
Just nine of the 27 sectors fell short of their growth targets in 2005.
Banks, watchmaking, pharmaceuticals and chemicals posted the highest volume growth.
While most companies were optimistic about 2006, 16 out of 27 sectors anticipated falling sales and volume growth.