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Swiss face new year of economic uncertainty

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Swiss face new year of economic uncertainty
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12:56 CET+01:00

Financial experts are forecasting a difficult year for Switzerland, with growth remaining sluggish, consumer prices dropping, and the performance of the economy largely dependent on international trends.

The Swiss economy is expected to experience only slight growth in the coming year, with gross domestic product (GDP) growth estimates ranging from 0.2 to 0.5 percent.

The economic slowdown will also have an effect on the job market. Research collated from several institutions predicts a rise in unemployment from the current 3 percent to 3.7 percent.

The Federal Council is more pessimistic and has warned that the official rate of unemployment will rise to 3.9 percent by the end of 2012, a figure that could increase still further if the eurozone fails to cure its financial woes.

Manufacturing industries, such as paper, printing and textiles, will be hit hardest, although job cuts are also expected in the financial sector.

Industries struggling with a fall-off in demand and the impact of a strong franc will also see staff numbers reduced. These include retail businesses, the catering trade and makers of industrial machinery, Alexis Bill-Körber from BAK Basel Economics told the Tages Anzeiger newspaper.

The construction industry, by contrast, is not expected to suffer. The same goes for the watch-making industry, thanks primarily to exceptional sales in Asia.

On average, salaries will go up by one percent, while consumer prices will drop as a consequence of the strong franc, experts forecast. For instance, it will become cheaper to travel by car as petrol prices are reduced, said Bill-Körber.

The Swiss will continue crossing the country’s borders to shop, while online discount sites like Deindeal.ch, will continue to grow, a sign that searching for bargains is no longer taboo.

“The attitude of consumers to bargain-hunting has changed," writes research firm Trendwatching.

On the macroeconomic side, the reconstruction of the Swiss financial sector will take precedence. With revenues on the wane and costs on the rise, banks are worried. 

"It will get even worse in 2012," Daniel Ettlin, from the Institute of Banking and Finance at the University of Zurich, told Tages Anzeiger.

Banks will see changes to their business models due to more demanding regulations. Some smaller banks may have to outsource their back office operations or merge with institutions, said Ettlin.

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