Swiss Government Expects Lower Growth on Euro Area’s Malaise
Oct. 16 (Bloomberg) — The Swiss government expects slower economic growth this year and next due to weaker domestic demand and exports to the euro area.
Swiss gross domestic product is forecast to rise 1.8 percent in 2014, and 2.4 percent in 2015, the State Secretariat for Economic Affairs in Bern said in a statement today. That compares with a June forecast for growth of 2 percent and 2.6 percent, respectively, which was based on an old method of calculating GDP.
“As a result of the continuing fragility of the global environment, in particular the faltering recovery in the euro region, the Swiss economy has lost some of its momentum,” the SECO said. “Even the robust German economy has recently been showing increased signs of weakness, primarily attributable to subdued exports.”
The euro area is Switzerland’s top destination for exports, and slack demand from within the bloc has begun to weigh on trade between the two economies. The Swiss eked out growth of just 0.2 percent in the second quarter compared with stagnation in the 18-nation currency region. The Swiss ZEW barometer on economic expectations for October fell to the lowest in two years, reflecting “concerns that euro zone contagion will spread.”
Last month, a deterioration of the economic outlook and a greater risk of deflation already caused the Swiss National Bank to cut its view on 2014 growth to 1.5 percent from 2 percent. SNB policy makers have pledged to take measures to supplement the central bank’s three year-old cap on the franc of 1.20 per euro “immediately” if warranted.
The SECO forecasts inflation of 0.1 percent this year and 0.4 percent in 2015, unchanged from its previous projections. It sees the unemployment rate at 3.2 percent in 2014 and 3.1 percent in 2015, up from its June forecast of 3.1 percent and 2.8 percent respectively.
Given policy easing by the European Central Bank to rekindle economic growth and inflation within the euro area, the SNB is likely to keep its cap on the franc in place until at least 2016, according to Bloomberg’s monthly survey of economists, published yesterday.
To contact the reporter on this story: Catherine Bosley in Zurich at cbosley1@bloomberg.net To contact the editors responsible for this story: Fergal O’Brien at fobrien@bloomberg.net Zoe Schneeweiss, Jana Randow
