Swiss to avoid recession this year: Credit Suisse

Swiss to avoid recession this year: Credit Suisse
Photo: Credit Suisse
Despite the negative impact of the strong franc, Switzerland should be able to avoid a recession this year “thanks to the robust situation of the global economy,” Credit Suisse said in a report issued on Tuesday.

However, the bank in its Monitor Switzerland report for the first quarter of 2015 warned that strong growth momentum is not expected this year — “a year of stagnation” — or in 2016.

The report, from Claude Maurer, an economic researcher for Credit Suisse, predicts 0.8 percent growth in the Swiss economy, following two percent growth last year.

The franc has appreciated in value about ten percent since January when the Swiss National Bank abandoned its policy of pegging the Swiss currency to the euro at a rate of 1.20 francs per euro.

The stronger franc is hurting Swiss exporters by making their products more expensive to customers in the eurozone, Switzerland’s biggest market for goods and services.

But Credit Suisse said it considers a “recession to be unlikely”.

It said a “super cycle” fed by immigration, the real estate boom, low inflation and low interest rates” continues to underpin consumer spending.

The super cycle “continues to turn, even if more slowly than before”.

The bank said economic recovery in Europe in the US are offsetting the negative effects from the loss of competitiveness in the export sector.

Unemployment insurance, meanwhile is acting as an “automatic stabilizer” and an economic safety net, while the central bank stands ready to intervene if the Swiss franc appreciates in value too much, the report said.

However, the export sector will suffer for some time to come, impacting expected growth in 2016 of 1.2 percent, which is below-average growth for Switzerland.

For more on the report, check here.

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