* Exports rise underlying 7 pct in August
* Government tweaks 2016 growth forecast higher
* Drug sector booming, watchmakers still struggle
(Recasts with economist, trade data, analysis)
By John Revill
ZURICH, Sept 20 The resilience of Switzerland's
export sector helped the government upgrade its economic outlook
for 2016 despite uncertainties like Britain's vote to quit the
The Swiss economy is expected to grow by 1.5 percent in
2016, the State Secretariat for Economic Affairs (SECO) said on
Tuesday, up from a June forecast of 1.4 percent.
The rate is almost double the 0.8 percent level last year
after Switzerland was shaken by a sudden surge in the franc when
the country's central bank in January 2015 scrapped a limit on
the currency versus the euro.
A stronger franc makes Swiss exports more expensive in the
eurozone, Switzerland's largest market, hurting the country's
But trade data on Tuesday showed a continued recovery, with
the trade surplus widening to 3.03 billion Swiss francs ($3.10
billion) in August as exports rose by a nominal, seasonally
adjusted 7 percent from a year earlier.
The increase was led by the country's pharmaceuticals and
chemicals sector, where exports rose 25 percent year on year,
although watchmakers continued to struggle, with shipments down
nearly 13 percent.
The downturn for watchmakers, driven by weaker demand in
tourism hot spots in Europe and slack sales in key markets like
Hong Kong, has already triggered profit warnings at industry
giants Richemont and Swatch.
SECO expects foreign trade to account for almost half of
Swiss GDP growth this year, compared with no contribution at all
"Trade is very important to the Swiss economy, and this year
a lot of growth impulses are coming from foreign trade," said
Ronald Indergand, head of short-term economic analysis at SECO.
"It's a varied picture across different sectors, and some
areas like tourism and manufacturing are still finding it tough.
But some like machinery, electronics and metals are doing
somewhat better, so at the moment it looks like the franc shock
has really bottomed out."
Some risks remained, not least how Brexit is enacted,
although no impact had materialised so far, SECO said.
"As long as this situation continues, there is a good
chance that the negative economic effect of a Brexit will remain
largely limited to the UK itself and will have only a moderate
impact on Continental Europe and other regions around the
world," it said.
SECO forecasts Swiss economic growth will accelerate in 2017
to 1.8 percent, the same estimate as in June and close to the
country's long-term average.
The improved prospects showed Swiss companies can cope with
the current level of the franc, Indergand said. The franc now
trades at around 1.0950 to the euro after rising above parity
early last year.
"The overall picture looks much brighter than a year ago,"
($1 = 0.9774 Swiss francs)
(Editing by Michael Shields)