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Swiss economic growth slows and disappoints

AFP · 27 Feb 2014, 16:59

Published: 27 Feb 2014 16:59 GMT+01:00

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Switzerland's economy grew just 0.2 percent during the final three months of last year, compared to the previous quarter, according to the statistics from Switzerland's State Secretariat for Economic Affairs, or SECO.

Fourth quarter growth, which had been expected to slow, was thus below the 0.5 percent hike seen in the third quarter and at the low end of expectations.

Analysts polled by the AWP financial news agency anticipating growth of between zero and 0.5 percent during the three-month period.

"The overall figures are a bit disappointing," J. Safra Sarasin analyst Alessandro Bee told AFP.

Compared to the same period a year earlier, the wealthy Alpine nation saw its economy grow 1.7 percent, which remained lower than the third quarter's annual growth rate of 1.9 percent.

SECO meanwhile said it now expected full-year growth for 2013 to tick in at 2.0 percent, up from 1.0 percent in 2012.

This initial estimate is in line with the central bank's forecast that growth would slow in the fourth quarter and that the economy for all of 2013 would swell between 1.5 and 2.0 percent.

Capital Economics analyst Jonathan Loynes cautioned though that the fourth quarter slowdown "may raise fears that the economy is finally succumbing to the strength of the Swiss franc."

Switzerland is not a member of the European Union and is thus outside the eurozone.

The Swiss economy has long been one of few bright spots on the European map, but the surging value of its franc has created headaches for exporters, whose margins can easily be eroded by unfavourable exchange rates.

To counter this effect, the central bank in 2011 set an exchange-rate floor of 1.20 francs to the euro.

Effect of Swiss immigration vote

Loynes pointed out that the franc had long hovered near the floor, but stressed that "the breakdown of growth by expenditure components provides some reassurance on this front," since the slowdown appeared to mainly be attributed to a hike in imports.

During the final three months of last year, imports swelled 1.4 percent, amid a 0.7 percent hike in household consumption.

Exports, not including luxury goods like precious metals and gems and artwork, meanwhile plunged 1.7 percent after showing strong growth during the previous quarter.

Exports in Switzerland's important chemicals and pharmaceutical sectors were especially hard-hit, SECO said.

Bee said the drop in exports was disappointing, but added that "I think the numbers reported in the third quarter for exports were too positive," so the comparative drop was perhaps overstated.

Story continues below…

He also stressed that domestic demand was still strong and should continue to boost growth going forward.

At the end of 2013, many analysts revised up their outlook for Swiss economic growth for this year, as they anticipated that exports would start picking up again.

But earlier this month, the country voted by a razor-thin margin to establish quotas on immigration from the European Union, putting in jeopardy a whole series of agreements with the bloc, its main trading partner.

Many observers have expressed concern that the prevailing climate of uncertainty might weigh heavily on investments in the country and its products.

Bee said on Thursday he thought the effects of the vote would be felt more in the long term.

"The limitation of free movements will have an impact but not in the short term," he told AFP.

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