Economic Outlook

US: Donald Trump’s victory in the US presidential election means that a man whose politics are hard to fathom now bestrides the world stage. His plans for an expansionary fiscal policy will be good for US growth, whereas restrictions on international trade would have negative economic consequences. It is very questionable, however, whether Trump will actually be able to realise his unconventional revamping of America’s foreign trade policy. We expect US GDP to grow by 2.3% in 2017.

Eurozone: Emmanuel Macron has been elected the next President of France. This year‘s biggest political risk, namely a victory for Marine Le Pen, has therefore been eliminated. Meanwhile, the eurozone economy is doing better than expected. Even so, monetary policy in the eurozone still needs to be kept on an expansionary track. Inflation looks set to stay below the ECB‘s target for a long time to come. We therefore do not expect to see an initial interest rate hike until 2019. The first priority will be a gradual wind-down of the asset purchase programme during 2018.

Switzerland: The Swiss economy is now performing solidly again. The growth rate is in line with the country’s European neighbours. GDP growth in the region of 1.5% for the current year looks realistic. Exporters are coping well with the strong franc, and personal consumption and corporate investment are also on course. But the mood in the hotel and catering sector is still rather subdued. Tourists are reacting to the strong franc by preferring other destinations.

Emerging markets: The prospects for the emerging markets in 2017 are rather more encouraging than they were a year ago. Oil-reliant Russia and Brazil can look forward to positive growth rates this year. Oil prices have crept up again, and that is good for these countries’ economic prospects. Major leading indicators in Russia, especially, have shown a significant recovery. Higher oil prices are propelling investment in the energy sector, with a positive impact on the economy as a whole. The Chinese economy has stayed on course, supported by additional government spending and monetary ease. Many observers hope that public sector enterprises will dismantle excess capacity on instructions from the government, but we see little chance of this happening. Such action would trigger mass layoffs, with undesirable social consequences that the Party would want to avoid. Instead, state-run banks will continue to keep debt-ridden public sector enterprises afloat by providing further credit. But that diverts resources away from healthy businesses, putting a drag on China’s growth outlook.