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Swiss economy grinds to standstill in third quarter

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Swiss economy grinds to standstill in third quarter
Advertising for Swiss watches in Beijing: exports have been hurt by the strong franc. Photo: Fred Dufour/AFP
11:33 CET+01:00
Switzerland’s economy ground to a halt in the third quarter of this year, according to figures released from Bern on Tuesday.

The country’s Gross Domestic Product changed by zero percent in the three-month period from the second quarter, based on provisional statistics, the State Secretariat for Economic Affairs (Seco) said in a report.

While stagnating compared to the previous quarter, the economy grew by 0.8 percent from the third quarter of 2014.

Prices dropped by 1.2 percent over the same period, Seco said.

The report comes a day after the KOF economic institute issued a report calling for a “slightly dimmed outlook” for the Swiss economy, which has outpaced that of the European Union for the past several years.

Its economic barometer fell, largely driven by a “marked deterioration of sentiment reflected by the indicators on Swiss manufacturing activity”, KOF said.

“Apparently, the Swiss manufacturing sector is still struggling with the franc appreciation shock,” KOF said.

The franc has sharply risen in value against the euro since the Swiss National Bank decided in January to abandon a policy, maintained for more than three years, of a price floor for the euro of 1.20 francs.

The bank said the policy was unsustainable owing to the weakness of the euro.

Th franc subsequently jumped in value, flirting briefly with parity against the euro until falling back slightly after the central bank introduced negative interest rates on large franc deposits.

On Tuesday morning the euro was trading just below 1.09 francs.

However, the SNB may be forced to respond with new measures after the European Central Bank announces its latest monetary policy decisions on Thursday.

ECB president Mario Draghi hinted recently that the central bank might cut its interest rate and announce more stimulus measures in the wake of anemic economic growth in the eurozone.

That could forced the Swiss central bank to further cut its interest rate for deposits, already at minus 0.75 percent. 

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