UBS Sees Risk of Swiss Recession If Virus Hits Europe Hard

(Bloomberg) --

Switzerland faces the risk of a recession if the coronavirus outbreak leads to quarantines or businesses closures in Europe, according to UBS Group AG.

Europe is already on high alert amid a rise in cases, with Italy forced to put some of the country into lockdown.

While supply chain disruptions in Asia probably won’t have a major impact for local companies, “the biggest risk for the Swiss economy comes from Europe,” economist Alessandro Bee wrote in a note. If European authorities follow Asia’s lead with wider shutdowns, a recession in Switzerland would be “entirely possible.”

Switzerland also faces the issue of haven buying of the franc. That could force the Swiss National Bank to step up the pace of its foreign currency purchases, or even cut interest rates even further below zero, Bee said.

He said that if sentiment doesn’t improve as initially projected, UBS’s 2020 growth forecast of 1.1% for Switzerland would be too optimistic.

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