Swiss Immigration Curbs Seen as Threat to Economic Growth

Switzerland’s decision to limit
immigration will hurt economic growth, according to economists
who cover the country.

Restrictions on foreigners approved by Swiss voters earlier
this month will hurt growth prospects, according to 16 of 21
responses in Bloomberg’s monthly survey of economists. Five said
the limits will have a negligible effect and none said the curbs
would have a positive impact.

Immigration limits are “clearly negative for growth,”
said Timo Klein, senior economist at IHS Global Insight Inc. in
New York. “The largest effect is not so much from any quotas
themselves but from the direct investment not taking place due
to firms fearing the uncertainty about not getting the personnel
they need in the future to make such investments profitable.”

The Swiss government will have to set a cap for foreigners
within the next three years after 50.3 percent of voters
embraced an initiative by the euro-skeptic Swiss People’s Party
SVP against mass immigration. A quota system for foreigners,
which companies including Nestle SA have warned may undermine
business, would contravene an agreement with the European Union
allowing its citizens to take up jobs freely and jeopardize
other accords as well.

Significant Drag

“This should be a considerable drag on potential growth,”
said Manuel Andersch, an analyst at Bayerische Landesbank in
Munich. “The full effect will only be visible once the concrete
immigration rules are known. The stricter the quota, in
particular for high-skilled workers, the larger the drag.”

Switzerland already has upper limits in place for newcomers
from countries outside the EU, such as Canada and Australia.
It’s not yet clear what form the quotas for EU citizens would
take. The government has said it will announce a road map by
June and propose a bill to parliament by the end of the year.

Immigration has boosted growth and helped propel national
output almost 5 percent above pre-crisis levels, the Swiss
National Bank
said in November. The Zurich-based central bank
predicts the economy will grow 2 percent this year, with
consumer prices climbing 0.2 percent.

Early Effect

According to Credit Suisse Group AG economists Claude Maurer and Maxime Botteron in Zurich, lower immigration will
damp annual growth by 0.3 percentage point. Jordan Rochester, an
economist at Nomura International Plc in London, predicts a drag
of 2 percentage points over a 10-year period, while Alan McQuaid, chief economist at Merrion Capital Group Ltd. in
Dublin, expects growth rates to be 0.1 percentage point to 0.2
percentage point lower over the next decade.

“The biggest negative effect” will come early on as
companies delay investing in equipment, said Reto Huenerwadel,
senior economist at UBS AG in Zurich. As time passes, the impact
could be offset, for example by gains in productivity, he said.

The decision to enact immigration limits met with
condemnation among some European officials, with French Industry
Minister Arnaud Montebourg deeming it tantamount to economic

Allowing EU citizens to take jobs in Switzerland is part of
a series of agreements governing trade in goods and services,
the environment, and scientific research, all of which could now
fall. The EU is Switzerland’s top destination for exports.

German Chancellor Angela Merkel warned yesterday against
any hasty judgments and said the EU must find a solution.

Among those warning of EU reprisals is Alastair Winter,
chief economist at Daniel Stewart & Co. in London. It’s “too
early to say but the EU will retaliate,” he said.


The survey also found that consensus is growing among
economists that the SNB won’t remove its cap of 1.20 per euro on
the franc before next year. It implemented the ceiling in 2011,
when investors seeking protection from the euro area’s debt
crisis boosted the Swiss currency, threatening to precipitate
deflation and a recession.

Last month, SNB President Thomas Jordan pledged to keep the
cap in place “for the foreseeable future.”

Just 9 percent of the economists surveyed said the SNB will
lift the ceiling this year, compared with 15 percent a month
ago. A plurality — 41 percent — predict an exit in 2015, up
from 35 percent last month, and 36 percent see the move in 2016,
the survey found.

The franc is seen weakening to 1.25 per euro by the end of
2014, before falling to 1.30 per euro in 2015 and 1.34 per euro
in 2016, according to data compiled by Bloomberg.

“The Swiss franc needs to have weakened to well above 1.30
per euro in order for the SNB to consider it ‘‘safe’’ to remove
the cap,” Klein at IHS said.

To contact the reporters on this story:
Andre Tartar in London at;
Catherine Bosley in Zurich at

To contact the editor responsible for this story:
Craig Stirling at

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Swiss Immigration Curbs Seen as Threat to Economic Growth
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