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Central bank cuts growth forecast in half

The Swiss National Bank is expecting the Swiss economy to slow down next year Keystone

The Swiss National Bank has sharply revised downwards its growth forecast for the Swiss economy next year.

This content was published on October 30, 2001 - 19:17

The economy is now expected to grow by one per cent instead of the two per cent estimated by the SNB in August, according to the Bank's vice president, Bruno Gehrig.

Speaking in Frankfurt on Tuesday at the Swiss-German Economics Club, Gehrig said the weak global economy was responsible for the lower forecast.

"Experience shows that development of the world economy plays an important role in what happens to the Swiss economy," he said.

He explained that foreign trade figures for August and particularly September had shown a significant weakening in the Swiss economy.

He added that the economic growth in Germany, Switzerland's number one trading partner, would remain clearly below its potential this year and in 2002.

However, Gehrig said the majority of growth indicators in Switzerland remained at a "relatively good level".

He added that the relatively low level of unemployment in Switzerland (1.7 per cent in September) supported household spending and consumer confidence.

As for monetary policy, Gehrig said the National Bank was keeping a close eye on exchange rates at a time of uncertainty.

He explained that the Bank had lowered the target range for the key London InterBank Offering Rate (Libor) by half a percentage point in September to counter the strengthening of the Swiss franc. The margin of fluctuation is now 1.75 - 2.75 per cent.

Since then, the Swiss currency had stabilised at around SFr1.48 to the euro, he said, although it was difficult to determine if this was due to the Bank's monetary policy or a normalisation of the financial markets.

Gehrig said the Bank was not expecting any fundamental changes after the physical introduction of the euro as a currency in January.

In economic terms, the euro had already existed for almost three years, and the single currency had made no significant impact on the autonomy of Swiss monetary policy, he added.

swissinfo with agencies

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