Experts cut Swiss economic growth outlook
The Swiss economy is expected to grow at a slightly slower pace than previously expected this year as it makes a “painful” adaptation to the strong franc, a group of experts for the federal government said on Tuesday.
The group now expects that Switzerland’s Gross Domestic Product (GDP) will expand by 0.8 percent in 2015, down from the 0.9 percent rate it predicted in March, the State Secretariat for Economic Affairs said.
The downward revision comes after the Swiss economy contracted by 0.2 percent in the first quarter of the year but the experts say they do not expect it to fall into a recession.
The negative growth was in part due to the appreciation of the franc after the Swiss National Bank decided in January to stop intervening in foreign currency markets to prevent it from strengthening, Seco said.
The rouble crisis in Russia, linked to unrest in Ukraine, and uncertainty about the eurozone because of Greece’s debt problems have helped boost the franc, traditionally seen as a safe haven currency in troubled times.
In the first quarter, strong domestic spending boosted the economy but this was offset by a decline in certain export sectors, Seco said.
“Chemical and pharmaceutical exports, which do not react strongly to exchange rate fluctuations, fell by three percent during the first quarter, while investments in the construction industry, which were positive in the first quarter, also began to lose growth momentum,” the secretariat said.
“The expert group expects an adaptation of the economy to the new exchange rate environment without falling into a severe recession.”
Seco cautioned that this was dependent on continued robust domestic spending and further recovery of the global economy.
The group has also revised downward its forecast growth for the Swiss economy in 2016 to 1.6 percent from 1.8 percent, with a “gradual improvement” over the coming quarters.
It expects unemployment to average 3.3 percent this year, while it predicts this will now rise to 3.5 percent in 2016 (up from 3.4 per cent forecast in March) with the greatest impact in German-speaking Switzerland.
The experts say that external issues remain worrying and could impact forecasts dramatically.
If Greece is unable to find a solution to finance its debt and an “extreme solution is envisaged” — presumably an exit from the eurozone — the franc would continue to strengthen against the euro.
A temporary solution to the crisis combined with a stronger expected recovery in the eurozone “should facilitate a depreciation of the franc in relation to the euro”.
A strong francs hurts Swiss exporters by making their products more expensive to foreign customers.