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Nadia Gharbi

Nadia Gharbi

Nadia Gharbi is economist at Pictet Wealth Management. She graduates in Université de Genève, Les Acacias, Canton of Geneva, Switzerland Do not hesitate to contact Pictet for an investment proposal. Do not hesitate to contact Pictet for an investment proposal. Please contact Zurich Office, the Geneva Office or one of 26 other offices world-wide.

Articles by Nadia Gharbi

Switzerland, still on the monitoring list

8 days ago

The U.S. Department of Treasury has just published its semi-annual report on International Economic and Exchange Rate Policies. It comes at a time when the US Administration remains deeply concerned by the significant trade imbalances in the global economy. The report only focuses on the US’s 12 largest trading partners, which collectively account for more than 70% of the US’s trade in goods. Although Switzerland is currently only the United States’ 15th largest trading partner (it used to be among the 12 largest), it still appears on the US Treasury semi-annual report. The main news was the inclusion of India on the department’s monitoring list, together with five other countries (China, Japan, Korea, and Germany,

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Switzerland, still on the monitoring list

9 days ago

Switzerland meets two of the US Treasury’s three conditions for being deemed a ‘currency manipulator’.The US Department of Treasury has just published its semi-annual report on International Economic and Exchange Rate Policies. The main news was the inclusion of India on the department’s monitoring list, together with five other countries (China, Japan, Korea, Germany and Switzerland).The Treasury has established three criteria for a country to be deemed a currency manipulator: a bilateral trade surplus of over USD 20 billion with the US, a current account surplus larger than 3.0% of GDP, and persistent, one-sided intervention including net purchases of foreign currency, conducted repeatedly, totalling in excess of 2% of an economy’s GDP over a 12-month period.Switzerland fulfils two of

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Hard data proves soft in the euro area

12 days ago

Euro area industrial production (excluding construction) was weak in February (-0.8% m-o-m) and follows the recent release of other disappointing pieces of hard data such as retail sales, German factory orders and trade. Based on available ‘hard’ data, real GDP growth rate in the euro area is projected to be 0.1-0.2% q-o-q in Q1 2018 (see chart below), a sharp slowdown from 0.6% q-o-q in Q4 2017. However, ‘soft’ data, such as PMI surveys, while also down in February and March, point to much stronger growth of 0.60.7% q-o-q. There is therefore a very wide gap between hard and soft data.
Several factors could explain the weakness in hard and soft data for the early months of 2018. Business surveys overstated the pace

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Hard data proves soft in the euro area

13 days ago

Signs of a certain loss of momentum may well fuel additional ECB dovishness in the near term, but is unlikely to compromise upcoming policy normalisation.Euro area industrial production (excluding construction) was weak in February (-0.8% m-o-m) and follows the recent release of other disappointing pieces of hard data such as retail sales, German factory orders and trade. Based on available ‘hard’ data, real GDP growth rate in the euro area is projected to be 0.1-0.2% q-o-q in Q1 2018, a sharp slowdown from 0.6% q-o-q in Q4 2017. However, ‘soft’ data, such as PMI surveys, while also down in February and March, point to much stronger growth of 0.6-0.7% q-o-q. There is therefore a very wide gap between hard and soft data.Several factors could explain the weakness in hard and soft data for

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Europe has a lot to lose from trade wars

18 days ago

Any estimate of the economic costs of protectionist measures, let alone trade wars, is subject to uncertainty given the complexity of global supply chains. A common assumption is that new tariffs on exports will produce small direct effects on GDP growth but more significant indirect effects in the event of escalating trade conflicts, including on domestic investment. Europe looks particularly vulnerable to such indirect effects given its relatively high degree of openness to trade. For all the talk about ‘Euroboom’, about one quarter of euro area GDP growth in 2017 was driven by net trade.

Euro area exports amounted to 47% of GDP in 2017 compared with 12% in the US. Importantly, the euro area is also highly

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Disentangling the Swiss current account

March 27, 2018

Following the Swiss National Bank’s (SNB) publication of Switzerland’s balance of payments data for Q4 2017, in this note we look deeper into the Swiss current account to try to find out why Switzerland persistently runs a surplus and whether or not the current account balance can be used to assess the fair value of the Swiss franc.
In 2017, the current account surplus stood at around 9.8% of GDP or CHF66bn. This was CHF4bn higher than in 2016. Persistent current account surplus can be explained by demographic trends, industrial structure as well as statistical distortions. As a result, the current account is far from a good proxy to value the Swiss franc.
In recent years, international debate about countries’

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Disentangling the Swiss current account

March 27, 2018

Switzerland’s high current account surplus is far from being a good proxy for assessing the fair value of the Swiss franc.Switzerland has run a current account surplus since the 1980s. In 2017, it stood at around 9.8% of GDP, CHF66bn. This was CHF4bn higher than in 2016.Economic theory suggests that a large current account surplus is a function of an undervalued currency. Based on this premise, there may be question marks over the SNB’s contention that the Swiss franc as “overvalued”.In a speech last year, SNB President Thomas Jordan pointed to structural factors and a number of statistical distortions that contribute to Switzerland’s persistent current account surplus, suggesting the current account is far from a good proxy for determining the fair value of the Swiss franc.The Swiss

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Disentangling the Swiss current account

March 27, 2018

Switzerland’s high current account surplus is far from being a good proxy for assessing the fair value of the Swiss franc.Switzerland has run a current account surplus since the 1980s. In 2017, it stood at around 9.8% of GDP, CHF66bn. This was CHF4bn higher than in 2016.Economic theory suggests that a large current account surplus is a function of an undervalued currency. Based on this premise, there may be question marks over the SNB’s contention that the Swiss franc was “overvalued”.In a speech last year, SNB President Thomas Jordan pointed to structural factors and a number of statistical distortions that contribute to Switzerland’s persistent current account surplus, suggesting the current account is far from a good proxy for determining the fair value of the Swiss franc.The Swiss

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Europe chart of the week – Employment

March 17, 2018

Euro area employment grew for the 18th consecutive quarter in Q4 2017 (+0.3% q-o-q), and is now 1.5% above its pre-crisis (2008) level. By contrast, hours worked per person employed decreased during the same period, remaining 4% below their pre-crisis level.
The two data series have followed divergent trends since the start of the economic recovery. Between Q1 2008 and Q2 2013, the total amount of labour input used by firms decreased massively. The fall was more significant in terms of total hours worked than in terms of headcount. Underlying these developments was a fall in average hours worked per person, which then remained broadly stable during the recovery (see chart below). To a large extent, steady hours

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Too early for Switzerland’s central bank to change policy…

March 15, 2018

…but it could start tightening at the end of this yearAt its latest  quarterly monetary policy assessment unveiled today, the Swiss National Bank (SNB) maintained its accommodative monetary policy. The target range for the 3-month Libor was kept between -1.25% and -0.25%, the interest rate on sight deposits with the SNB was maintained at a record low of -0.75%, and the central bank reiterated its willingness to intervene in the foreign exchange market if needed.Importantly, the central bank’s assessment of the Swiss franc also remained unchanged, stating that it continued to see the currency as “highly valued” and the situation on foreign exchange markets as fragile, adding that “monetary conditions may change rapidly”.The SNB also revised down its forecasts for inflation and GDP growth

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Too early for Switzerland’s central bank to change policy…

March 15, 2018

…but it could start tightening at the end of this year.

At its latest quarterly monetary policy assessment unveiled today, the Swiss National Bank (SNB) maintained its accommodative monetary policy. The target range for the 3-month Libor was kept between -1.25% and -0.25%, the interest rate on sight deposits with the SNB was maintained at a record low of -0.75%, and the central bank reiterated its willingness to intervene in the foreign exchange market if needed.
Importantly, the central bank’s assessment of the Swiss franc also remained unchanged, stating that it continued to see the currency as “highly valued” and the situation on foreign exchange markets as fragile, adding that “monetary conditions may change

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Europe chart of the week – SNB FX intervention

March 10, 2018

Despite tensions since the beginning of the year, there is no evidence of FX market interventions by the Swiss central bank.

SNB FX Intervention
In the wake of the financial crisis, the Swiss National Bank (SNB) increased massively the monetary base to provide liquidity and limit the Swiss franc’s appreciation. The expansion in the monetary base can essentially be seen in the form of an increase in sight deposits held by domestic Swiss banks at the SNB. The SNB does not communicate on its interventions in the foreign exchange (FX) market (except in its annual report). One way to estimate when the SNB has intervened is to look at the weekly variations in sight deposits it holds. Since summer 2017, weekly variations

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Europe chart of the week – SNB FX intervention

March 9, 2018

Despite tensions since the beginning of the year, there is no evidence of FX market interventions by the Swiss central bank.In the wake of the financial crisis, the Swiss National Bank (SNB) increased massively the monetary base to provide liquidity and limit the Swiss franc’s appreciation. The expansion in the monetary base can essentially be seen in the form of an increase in sight deposits held by domestic Swiss banks at the SNB. The SNB does not communicate on its interventions in the foreign exchange (FX) market (except in its annual report). One way to estimate when the SNB has intervened is to look at the weekly variations in sight deposits it holds. Since summer 2017, weekly variations show no evidence of FX market intervention by the SNB (see Chart).On March 15, the SNB will

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SNB confirms record profit for 2017

March 8, 2018

The Swiss National Bank (SNB) published its 2017 annual result today. The SNB confirmed a profit of CHF54.4bn in 2017. This was more than double the 2016 figure (CHF24.5bn) and its biggest profit ever. Earnings from the SNB’s foreign currency positions amounted to CHF49.7bn, its gold holdings increased in value by CHF3.1bn and its Swiss positions by CHF2bn (see Chart below).
The CHF2bn profit the SNB made on its Swiss franc positions essentially arose from the SNB’s negative interest charge* on sight deposit account balances (CHF2.0bn). This was more than in 2016 (CHF1.5bn) and in 2015 (CHF1.1bn).
Regarding foreign-currency positions, interest income amounted to CHF9.3bn and dividend income to CHF3.2bn. Price losses

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Italy: Political fragmentation leads to a hung parliament

March 5, 2018

The election result means the risk of an anti-system coalition has risen, but remains relatively low.Italian voters have shifted significantly to the right and towards populist parties in Sunday’s election, with a huge split between the North and the South. More than 50% of the votes went to Eurosceptic parties (Five Star Movement and the Northern League). As no single party or coalition won an absolute majority, negotiations to form a new government will start after parliament reconvenes on 23 March and could extend until the summer.The election result means the risk of an anti-system coalition (La Liga + Movimento 5 Stelle) has increased, but remains low, in our view. The centre-left Democratic Party might decide to participate in a M5S-led government to block an anti-establishment

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SNB confirms record profit for 2017

March 5, 2018

The SNB made a record high profit in 2017, mainly due to its foreign currency positions.The Swiss National Bank (SNB) published its 2017 annual result today. The SNB confirmed a profit of CHF54.4bn in 2017. This was more than double the 2016 figure (CHF24.5bn) and its biggest profit ever. Earnings from the SNB’s foreign currency positions amounted to CHF49.7bn, its gold holdings increased in value by CHF3.1bn and its Swiss positions by CHF2bn.The CHF2bn profit the SNB made on its Swiss franc positions essentially arose from the SNB’s negative interest charge* on sight deposit account balances (CHF2.0bn). This was more than in 2016 (CHF1.5bn) and in 2015 (CHF1.1bn).Regarding foreign-currency positions, interest income amounted to CHF9.3bn and dividend income to CHF3.2bn. Price losses of

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Who will tackle Italy’s root problems?

March 2, 2018

Just ahead of Sunday’s general election, there is little sign of appetite among the leading parties to tackle the significant challenges that Italy faces.

The Italian general election campaign is in its final stretch before voting on 4 March. The election will take place under the new electoral law (Rosatellum bis), which allocates 37% of parliamentary seats via the principle of “first-past-the-post” and 61% via proportional representation, with the remaining 2% reserved for overseas constituencies (see our previous Flash Note for further details).

According to the last polls published before the blackout period (Italian law prohibits poll publication during the two weeks preceding elections) no single party or

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Switzerland: So far so good

March 2, 2018

According to the State Secretariat for Economic Affairs (SECO)’s quarterly estimates, Swiss real GDP rose by 0.6% q-o-q in Q4 (2.4% q-o-q annualised; 1.9% y-o-y), above consensus expectations (0.5%). The Swiss economy expanded by 1.0% in 2017 overall, in line with our own forecast. This comes after GDP growth of 1.4% in 2016 and 1.2% in 2015.
Two aspects of today’s report are worth mentioning. First, on the expenditure side, both domestic demand components and foreign trade helped to boost Swiss growth in 2017. Second, the largely export-oriented manufacturing sector was the main driver of GDP growth in 2017. The service sectors such as accommodation and food services and financial services also provided substantial

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Switzerland: So far so good

March 1, 2018

The Swiss economy is gaining momentum, with growth becoming more broad based at the end of the year.Switzerland lagged the US and the euro area in terms of annual GDP growth for the third consecutive year in 2017, but today’s data confirm that the Swiss economy is continuing its recovery. Economic prospects for this year look promising. We expect growth in the Swiss economy to accelerate from 1.0% in 2017 to 2.0% in 2018, reducing the gap with other economies.According to the State Secretariat for Economic Affairs (SECO)’s quarterly estimates, Swiss real GDP rose by 0.6% q-o-q in Q4 (2.4% q-o-q annualised; 1.9% y-o-y), above consensus expectations (0.5%). The Swiss economy expanded by 1.0% in 2017 overall, in line with our own forecast. This comes after GDP growth of 1.4% in 2016 and 1.2%

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Europe chart of the week – Business surveys

February 27, 2018

There was a broad-based setback in euro area business surveys in February, whether in terms of country or of sector. The Flash composite PMI slipped to 57.5 in February from 58.8 in January. The month-to-month dip was the biggest since 2014.
National business surveys painted a similar picture. In Germany, the Ifo business climate index dropped by 2.2 points to 115.4 in February, from an all-time high of 117.6 in January. A pullback was expected albeit not that strong. The index suffered from both the weaker business assessment (-1.5 points to 126.3) and a noticeable 2.9 point decline in business expectations to 105.4 in February. This was the third consecutive month-on-month decline in German business expectations

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Who will tackle Italy’s root problems?

February 26, 2018

Just ahead of Sunday’s general election, there is little sign of appetite among the leading parties to tackle the significant challenges that Italy faces.According to the last polls published before the blackout period, no single party or coalition is projected to win an outright majority in the Italian general election next Sunday. Given cyclical growth, near-term economic risks seem to be contained, but Italy’s potential growth rate is low, and youth unemployment is among the highest in Europe. The country has the second-highest debt load in the euro area after Greece (132% of GDP). Over the past few years, Italy has endeavoured to address certain structural issues, but more steps need to be taken to lift the Italian growth rate to a sustainably higher level.Whatever Italy’s next

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Europe chart of the week – Business surveys

February 23, 2018

Latest business surveys surprise on the downside, but still indicate that economic expansion remains strong.There was a broad-based setback in euro area business surveys in February, whether in terms of country or of sector. The Flash composite PMI slipped to 57.5 in February from 58.8 in January. The month-to-month dip was the biggest since 2014.National business surveys painted a similar picture. In Germany, the Ifo business climate index dropped by 2.2 points to 115.4 in February, from an all-time high of 117.6 in January. A pullback was expected albeit not that strong. The index suffered from both the weaker business assessment (-1.5 points to 126.3) and a noticeable 2.9 point decline in business expectations to 105.4 in February. This was the third consecutive month-on-month decline

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Euro area: Flash PMI surveys pass their peak

February 22, 2018

The IHS Markit flash composite purchasing managers’ index (PMI) for the euro area eased to 57.5 in February from 58.8 in January, below consensus expectations (58.4). The index marked its the largest monthly decrease since August 2014. Activity in both services PMI (-1.3 points to 56.7) and manufacturing (-1.1 points to 58.5) cooled in February. But while the breakdown by sub-indices showed that the pace of growth in new orders and output slowed (see Table), it remains close to record highs, and consistent with solid growth. Momentum in job creation remained brisk, with Markit mentioning that “new business was sufficiently strong to encourage companies to boost staffing levels to one of the greatest extents seen

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Europe chart of the week – Italian productivity

February 14, 2018

With less than 30 days to go, the Italian general election remains highly unpredictable. The new electoral system and the fact that 37% of seats are to be allocated on a ‘first-past-the-post’ system make projecting seats from voting intentions particularly hard.
Importantly, Italy is going into this election with an economy that is performing relatively strongly relative to recent history. However, cyclical strength is masking structural weaknesses. Over the past few years, Italy has endeavoured to address certain these weaknesses, but some reforms have not gone as far as necessary. Labour productivity remains a problem : while the other big euro area economies have seen 1% annual average productivity growth since

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Switzerland: inflation edged lower in January

February 13, 2018

According to the Swiss Federal Statistical Office (FSO), the headline consumer price index (CPI) inflation eased to 0.7% y-o-y in January from 0.8% y-o-y in December, in line with consensus and our own expectations. Core inflation (CPI excluding food, beverages, tobacco, seasonal products, energy and fuels) also eased, from 0.7 % y-o-y in December to 0.5% y-o-y in January (see Chart 1), back to the level of October 2017.
The FSO report showed that inflation for imported goods and services slowed down in January (to 2.0% y-o-y from 2.4% y-o-y in December) mainly due to the weaker franc and energy base effect. Meanwhile, inflation for domestic goods and services remained stable at 0.3% y-o-y in January.

Swiss

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Switzerland: inflation edged lower in January

February 12, 2018

Core inflation fell back to the same level as last October. Our scenario for monetary policy remains unchanged.Headline consumer price index (CPI) inflation eased to 0.7% y-o-y in January from 0.8% y-o-y in December, in line with consensus and our own expectations. Core inflation fell from 0.7% y-o-y in December to 0.5% y-o-y in January.Our inflation outlook remains unchanged. We expect headline inflation to firm up gradually as 2018 progresses, averaging 1.0% in 2018, but with risks tilted to the downside.Given the outlook for inflation is still contained, the Swiss National Bank is likely to remain cautious and true to its current ‘two-pillar’ strategy. Our best guess is that there will be a first rate hike of 25bp in December 2018.Read full report here

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Europe chart of the week – Italian productivity

February 9, 2018

Among the main challenges facing Italy, stagnant labour productivity is one of the most important.With less than 30 days to go, the Italian general election remains highly unpredictable. The new electoral system and the fact that 37% of seats are to be allocated on a ‘first-past-the-post’ system make projecting seats from voting intentions particularly hard.Importantly, Italy is going into this election with an economy that is performing relatively strongly relative to recent history. However, cyclical strength is masking structural weaknesses. Over the past few years, Italy has endeavoured to address certain weaknesses, but some reforms have not gone as far as necessary. Labour productivity remains a problem: while the other big euro area economies have seen 1% annual average

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When will the SNB start the process of policy normalisation?

February 2, 2018

When the Swiss National Bank (SNB) scrapped its currency floor three years ago, its monetary policy strategy was clear: to fight Swiss franc appreciation. It did so verbally, by calling the currency “significantly overvalued”, and physically, by implementing a negative interest rate and intervening in the foreign exchange market as necessary.
Three years on, the interest rate on sight deposits at the SNB remains unchanged at a record low of – 0.75%. What’s more, over this time the SNB  has intervened in the FX market by spending CHF 86 billion on foreign currency assets in 2015, another CHF 67 billion in 2016 and an estimated (based on the weekly variation of deposits at the SNB) CHF 44 billion in 2017. The only

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When will the SNB start the process of policy normalisation?

January 31, 2018

The SNB may soon start to normalise its monetary policy. We expect a first rate hike of 25bp in December 2018.There are several reasons to believe that the SNB may soon start to normalise its monetary policy. First, the Swiss macroeconomic outlook has improved: Swiss growth is picking up and becoming broader-based across a range of sectors, while inflation is also gradually rising. Second, the Swiss franc has weakened and the pressure on the currency has become somewhat softer. Third, other central banks (in particular the Fed and the ECB) are gradually removing some of their own stimulus. The key question is when and how the SNB will normalise?A change of communication regarding future monetary policy is likely during H2 2018 as the SNB will want to wait for sure signs that the European

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Euro area: Business activity expanding at its fastest pace in nearly 12 years

January 24, 2018

The flash composite Purchasing Managers’ index for the euro area increased to 58.6 in January from 58.1 in December, above consensus expectations (57.9).  The services sector index rose, offsetting the decline in the manufacturing index . Companies also expressed growing optimism about this year’s outlook, with business expectations up to an eight-month high.
The only piece of less positive news was a modest drop in forward-leading indicators in the manufacturing sector, consistent with our forecast of a gradual slowdown in the pace of growth in the second half of 2018. Still, January PMIs confirm that growth is improving in terms of quantity as well as quality, with rising job creation and investment. We forecast

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