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Switzerland to escape recession: SNB chief

Malcolm Curtis · 22 Nov 2012, 11:54

Published: 22 Nov 2012 11:54 GMT+01:00

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But economic growth will be weak in the coming quarters, warned Thomas Jordan, chairman of the Swiss National Bank (SNB) in an interview with Tages Anzeiger that appeared on Thursday.

“Although the economic development of the euro zone is very important for Switzerland and the regional recession is having a dampening effect on us, we currently do not expect that Switzerland will slip into recession,” Jordan said.
“But we will have in the coming quarters very low growth rates,” he cautioned.

“For the full year 2012, we still expect one percent growth.”

Jordan said he anticipated weak but still positive growth for the third and fourth quarters.

In addition to problems with Europe’s peripheral countries, such as Greece, where growth has stalled, Switzerland is also impacted by “unresolved budgetary conditions in the USA”, he said.

The central bank chairman said the SNB was prepared to take additional measures if necessary to support the economy.

But he avoided giving a direct answer to a question about whether the central bank was prepared to defend a higher exchange rate for the euro against the Swiss franc of 1.30.

In September 2011, the bank began defending a minimum level of 1.20 euros to the franc after the safe-haven currency briefly flirted with parity with the euro.

The exchange rate has remained rock-steady since then, with the SNB buying euros on FX markets to prevent the franc’s appreciation.

The policy was introduced “to avoid extremely negative development for our country,” Jordan said.

By effectively drawing a line in the sand, the SNB “has reduced the strong deflationary risks and prevented an impending crash in the Swiss economy,” he said.

Among other issues, Jordan said he remained concerned about the “strong momentum in mortgage lending” and the continuing rise in housing prices, particularly for condominiums.

Rising prices in themselves are not a problem, he said.

But “if the price trend in the property market is not to be explained by fundamental factors, then we are moving in the direction of a price bubble that will burst sooner or later”.

Malcolm Curtis (news@thelocal.ch)

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