Majority of Swiss CFOs optimistic about 2017

The economic upturn seen in recent quarters is continuing its trend. The winter edition of the Deloitte CFO Survey reveals a further improvement in the economic and financial expectations of Swiss CFOs. Even the persistent macroeconomic risks and concerns are unable to buck the trend, with 64% of CFOs foreseeing an improvement in their company’s financial situation in the next twelve months.

The economic prospects for Swiss companies have gradually recovered over the past two years. Since companies were hit with the shock removal of the EURCHF exchange rate floor in January 2015, optimism among Swiss CFOs has steadily risen.   For the first time since then, the net balance for CFOs’ assessment of their own company’s financial prospects – i.e. the difference between positive and negative expectations – was back above the 50% mark in the fourth quarter of 2016, reaching 55%. Almost two thirds (64%) of the 101 CFOs surveyed are optimistic about their company’s outlook in the next twelve months (Q3 2016: 53%). It is also the first time that negative expectations (9%) are in the single digits, compared to 12% in the previous quarter. 

Aside from their own company’s prospects, 93% of Swiss company executives take a positive or at least neutral view of the economic outlook for Switzerland for the next twelve months. Compared with the previous quarter, negative expectations have thus declined from 12% to 7%, while positive economic expectations have improved to 50%. These expectations are mirrored in the official economic forecasts, which also expect the Swiss economy to continue to recover: Despite a muted performance in the third quarter of 2016 (0% growth), the State Secretariat for Economic Affairs (SECO) anticipates growth of 1.5% for 2016 and 1.8% for 2017.

“Swiss companies are undergoing a promising phase of recovery as far as their own development prospects are concerned. Despite the existing external risks, many firms are confident of pursuing a progressive strategy and recognise promising opportunities for growth,” says Michael Grampp, Chief Economist for Deloitte in Switzerland. “Specifically, Swiss CFOs cite expansion plans through M&A transactions and the tapping of foreign markets as particular opportunities. Investment in new, innovative products and digitalisation are also once again listed among the top five opportunities for companies.”

Uncertainty in the economic and financial environment remains high

While the majority of CFOs take a positive view with regard to their economic and financial performance, a number of challenges remain for companies. The upcoming elections in France and Germany – two important European trading partners for Switzerland –, the uncertain implementation of Brexit and not least the continuing lack of clarity over the new US government’s priorities are all detracting from companies’ planning security. Geopolitical risks are regarded as the greatest challenge by the CFOs surveyed, surpassing the risk of the strong Swiss franc and fears of weakened domestic demand, which were listed in second and third place respectively.

“Although many risks are omnipresent, it appears that they are generally having less of a direct impact on company prospects than in the past. In the last two years, companies have better adapted to the enduring macroeconomic risks. This is reflected in particular by the strong Swiss franc, which is not quite as much of a cause for concern as it was in the previous year,” says Dennis Brandes, Senior Economic Analyst for Deloitte in Switzerland and co-author of the survey.

Strengthening the recovery with new investments

One in two companies expecting an increase in new investments¹ in the next year. The net balance in this regard amounts to 35%, up 15 percentage points from Q3 (20%). Margin expectations for the next twelve months have also improved: Slightly more CFOs anticipating a margin improvement (33%) than a deterioration (31%) (previous quarter: 24% improvement, 31% deterioration).

¹ New investments are defined as an increase in capital stocks