Economic environment

International

At the turn of the year 2014 / 2015, the global economic environment was characterised by a hesitant recovery. Whereas the upswing in the USA had gained further momentum, in the Eurozone there was still no sign of any real acceleration in economic activities. The low oil price and the favourable Euro exchange rate should have a positive effect in the coming months.

As a result of geopolitical tensions in the Ukraine and the low oil price, Russia has slid into recession. To date, the Central and Eastern European regions has proven resistant to adverse influences.

Switzerland

During 2014, the Swiss economy experienced solid development. For 2015, however, the KOF Economic Research Center of the Swiss Federal Institute of Technology in Zurich predicts a recession due to the effects of the so-called “Swiss Franc shock”. On 15 January 2015, the Swiss National Bank (SNB) ceased its policy of supporting a minimum Euro exchange rate of CHF 1.20. The KOF assumes that over the next two years the Swiss Franc will oscillate around parity with the Euro. Exports – around 60 percent of Swiss exports go to the Eurozone – will probably fall sharply in 2015.

Liechtenstein

The removal of the Euro minimum exchange rate support and the slower development of the global economy will probably cause the Liechtenstein economy to slacken sharply. Around two thirds of Liechtenstein industrial production are exported to the European economic area. 2014 was a challenging year for Liechtenstein’s financial service providers. Lower market interest rates lead in some cases to higher interest rate hedging costs.

Interest rates

In view of the strengthening economic recovery, the Federal Reserve System (Fed) is expected to raise key interest rates in the US from the middle of 2015.

On 22 January 2025, the European Central Bank (ECB) decided to buy government bonds of the Euro states for EUR 60 billion per month from March until at least the end of September 2016. With this step it wants to drive down interest rates. It left the key interest rate at a record low of 0.05 percent.

In step with the removal of support for the Euro minimum exchange rate, the SNB increased negative interest to 0.75 percent for bank deposits. With this measure, it wants to make Switzerland less attractive for international investors and reduce the upward pressure on the Swiss Franc. Several Swiss banks also introduced negative interest rates for large clients in January 2015.

Financial markets

The slowdown in global growth was the key topic on the financial markets in 2014. On account of low interest rates, engagements in low-risk investments are less attractive. Consequently, prices on the stock markets rose substantially. After the International Monetary Fund (IMF) revised its forecast for global economic development downwards at the beginning of October, the stock markets saw major price corrections.

However, the continuing willingness of the central banks to support the economy led to a rapid recovery in prices so that in November new record levels were reached in some cases. The SNB’s withdrawal of support for the minimum exchange rate of the Swiss Franc relative to the Euro in mid January 2015 triggered a price collapse of the Swiss Market Index (SMI) and led to a re-evaluation of Swiss equities.

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