Swiss Government Cuts 2009 Economic Growth Forecast
The Swiss government scaled back its economic forecast for next year as the slowing global economy hits exports and inflation erodes spending.
The economy will grow at a rate of 1.3 percent in 2009, the Bern, Switzerland-based State Secretariat for Economic Affairs said today in a statement. That's less than a March forecast of 1.5 percent growth. The government left unchanged the 1.9 percent forecast for expansion this year. Growth was 3.1 percent last year.
Swiss expansion is set to ease further as slowing growth in the U.S. and Europe cuts into sales abroad and financial market turmoil sparked by the U.S. housing crisis hurts earnings at banks including UBS AG and Credit Suisse Group. At the same time, record prices for raw materials such as oil and steel are squeezing companies' profit margins and fueling the fastest inflation in 15 years.
“The slowing of exports which can already be seen may continue in the face of weaker growth abroad and the stronger Swiss franc,'' the release said. “The export of financial market services will show a particularly marked weakening, after showing high growth in recent years.''
The KOF economic research institute in Zurich today cut its growth forecast for this year to 2 percent from 2.1 percent and to 1.8 percent for 2009 from a previously estimated 2 percent.
Slower Growth
While the franc's 19 percent gain against the dollar in the past year helps offset the rise in oil prices, it is also making exports less competitive. The franc has gained 2.3 percent against the euro, making Swiss goods more expensive in the country's biggest export market.
“Growth will be much slower'' in 2009, Swiss National Bank President Jean-Pierre Roth said at the central bank's monetary policy meeting June 19 cash advance easy payday loans. After reiterating the SNB's forecast that the domestic economy will grow between 1.5 percent and 2 percent this year, Roth said “the reality is that the economy is growing much weaker than the forecast may suggest.''
The SNB left its target interest rate on hold at 2.75 percent last week, saying slowing growth would damp inflation.
Inflation will probably average 2.5 percent this year before slowing to below 2 percent next year, the release said.
Switzerland's leading economic indicators fell to the lowest in more than four years in May and manufacturing growth eased for the third time in four months. Swiss economic expansion slowed to 0.3 percent in the first quarter, the weakest pace in more than three years.
Emerging Markets
Some exporters are weathering the slowdown as emerging economies boost purchases of Swiss industrial products to expand infrastructure. Zurich-based ABB Ltd., the world's largest builder of electricity networks, said first-quarter profit soared 87 percent as China and India increased investment in power stations and grids.
Still, sales abroad may decline as global growth cools and central banks shift their attention from fighting the global credit squeeze to curbing inflation. Confidence in the world's economy declined this month after central banks signaled interest rates may rise, a survey of Bloomberg users showed.