* SNB chairman says Switzerland faces big challenges
* Says recovery in Europe important for Swiss prospects
(Recasts with added comments, background)
By Laura MacInnis
GENEVA, March 22 (Reuters) - Demand for Switzerland's exports remains "remarkably resilient" but uncertainties including risks of protectionism cast a shadow on the global economy, the head of the Swiss National Bank said on Tuesday.
SNB Chairman Philipp Hildebrand said rising oil prices in the midst of conflict in Libya and concerns about Japan's earthquake, tsunami and nuclear troubles could cloud the economic outlook, even for the wealthy Alpine country where unemployment is 3.4 percent.
"Uncertainty is elevated in every respect," he told a news briefing in Geneva.
While praising efforts by European Union finance ministers to address the euro zone's debt problems, Hildebrand said there remained worries for Switzerland, which sells most of its goods to the EU bloc.
"The European debt problem in a number of peripheral countries in the EU continues to cast a shadow of uncertainty and risk on the Swiss economy," he said.
"Switzerland does well, globally speaking, when Europe is doing well," he said. "It is in Switzerland's interest to see Europe re-find the path to stability."
Hildebrand also called on other countries to avoid trying to shield their economies in response to economic worries.
"It remains one of the biggest challenges to keep resisting all temptations of protectionism, including in foreign exchange," he said.
Last week, the SNB left its interest rate target unchanged at an ultra-low level -- just 0.25 percent for the 3-month franc LIBOR -- saying price stability was assured for the short term.
It also raised its 2011 growth outlook to around 2.0 percent from 1.5 percent.
But Hildebrand warned that a strong Swiss franc alongside near-zero interest rates could eventually cause distortions in Switzerland's construction, housing and other sectors, and said it was important to watch carefully for risks.
"While we can be satisfied with the performance of the Swiss economy, the way it has emerged out of this historic crisis, I think complacency would be the wrong attitude," he said. "We continue to face very significant challenges." (Additional reporting by Robin Bleeker; editing by Stephen Nisbet) (laura.macinnis@thomsonreuters.com; +41 79 240 9036; Reuters Messaging: laura.macinnis.reuters.com@reuters.net))