Strong franc slows economic growth

Despite a strong economic rebound underway, forecasters at the Swiss Economic Institute (KOF) say a strong franc will hit the brakes on growth next year.

The institute said in its annual autumn report released on Monday that Switzerland’s Gross Domestic Product (GDP) had soared 2.7 per cent this year, surpassing the European Union and the United States. In June forecasters had predicted GDP growth at 1.8 per cent.

Growth will likely slump to 1.8 per cent for 2011 as exports and the tourist industry suffer under a franc practically one-to-one with the dollar and whittling away at the euro. That is still 0.2 percentage points more than KOF had predicted in June thanks to a positive effect from austerity packages in foreign countries.

A weak euro could stimulate consumers’ moods in Switzerland and lead to GDP growth of 2.2 per cent in 2012, it said.

Meanwhile, fears of double-dip recession due to lingering economic uncertainties in the US and EU seem to be waning thanks to an Asian boom, the group said.

Inflation will likely fall over the next few years as well. The current rate rests at 0.8 per cent, 0.2 percentage points lower than predicted. Next year the rate should fall to 0.7 per cent.

The KOF report is somewhat more optimistic than other expert opinions. The State Secretariat for Economic Affairs (Seco) pins GDP growth at 1.2 per cent for 2011, while BAK Basel puts the figure at 1.4 per cent.

swissinfo.ch and agencies