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Swiss economy outperforms but concerns remain

A rising franc puts exports to Europe at risk but the strength of the dollar has helped exporters

(PHOTOPRESS/Martin Ruetschi)

The Swiss government on Tuesday confirmed the country’s economy had outperformed earlier forecasts but warned the recent upswing could slow as the year continues.

Economists believe fading stimulus measures and listless growth across Europe could produce knock-on effects that will adversely affect the Swiss economy.

Economic growth is expected to average 1.4 per cent over the year, an improvement on the projected 0.7 per cent, the State Secretariat for Economic Affairs (Seco) announced.

Seco noted a rebounding in exports and continuing domestic demand for products. It forecast growth of 2.0 per cent for 2011.

The estimate follows similar projections last year by the Swiss National Bank, which said last week the economic recovery was underway in Switzerland and was even starting to improve demand for labour.

The central bank raised its inflation forecast and sees it crossing its price stability threshold of two per cent in 2012. Seco said inflation would be 0.8 per cent this year.


Experts noted strong growth in the United States and said gross domestic product there could climb to between 2.5 and three per cent. But the head of Seco’s economic policy directorate said things could be better to the east.

“It’s certainly not a dynamic recovery in Germany and that’s something that always is problematic for Switzerland,” Aymo Brunetti told

The Paris-based Organisation for Economic Co-operation and Development late last year released a preliminary outlook saying improvement in Europe’s largest economy could be sluggish till the middle of 2010.

Seco shares the view but Brunetti said it was difficult to say how the qualitative effects of Germany’s problems would materialise.

Switzerland’s largest trading partner had implemented a rather large stimulus package – “Abwrackprämie” – a scheme similar to the one in the United States where people traded in their jalopies toward credit for new cars.

The effects of such programmes, and of others across Europe, are expected to begin wearing off. Indeed, momentum in Europe began slowing late last year.

Jan-Egbert Sturm, head of the KOF Swiss Economic Institute in Zurich, said: “Germany clearly suffered quite a lot.”

Switzerland in comparison, kept its discretionary stimulus packages to a minimum, instead relying on automatic stabilisers such as its unemployment insurance payments scheme.

Greece, lightning-fast recovery?

The strength of the Swiss economy, in combination with Europe’s economic woes and concerns about Greek solvency, have buoyed the franc, which has gained 4.5 per cent against the euro over the past four months. The euro is currently worth about SFr1.45 ($1.37).

“We’re out of recession, we’re back to growth, so this is something that is not a surprise,” said Janwillem Acket, chief economist at Bank Julius Bär. “But it is on the back of a small and open economy, which is an island in Euroland.”

He added that the rise of the dollar tempered the overall effect the appreciating franc had on exports within Europe. Acket, who predicted robust growth in Switzerland half a year ago, told the country’s performance was “astonishing” in light of the situation in Germany.

Seco doesn’t comment on monetary policy but Acket said: “The Swiss National Bank is well advised, and I think is doing a good job at the moment, in trying to dampen the appreciation of the euro due to the fact we have these Greek concerns.”

He predicts that with the coming of stabilisation in Europe, Western OECD countries will see a slowdown in growth, a trend that will include Switzerland.

Brunetti believes the US’s heavily indebted balance sheets are in for a correction in the longer term. “I think there are some corrections of over indebted balance sheets in the US economy that are important and they involve some years of lower growth.”

Justin Häne,


Economists have expressed satisfaction with the performance of the Swiss economy, which has performed better than its European neighbours.

“We are quite surprised,” Jan-Egbert Sturm of the KOF Swiss Economic Institute told

He said there was “some decoupling” of Switzerland’s economy from that of Germany (Switzerland’s main trading partner) but added domestic strengths were at play.

Sturm says Switzerland’s pharma industry remained stronger than Germany’s.

Swiss industry, which is generally more specialised compared with Germany’s orientation toward mass production, is also said to have helped.

There is some hesitation about the world’s largest economy.

Seco’s Aymo Brunetti says the US is in for a correction – he’s just not sure when.

Sturm notes that although the US has posted impressive growth figures, much of that has been on the back of massive government intervention.

He says the structural problems that put the US into its current mess are not being resolved.

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