Credit Suisse warns growth will slow in 2005

Bischofberger says there won't be a decline in overall exports next year Keystone Archive

Swiss economic growth looks set to drop down a gear next year after being driven by exports in 2004, according to the Credit Suisse Group.

This content was published on October 5, 2004 minutes

Switzerland’s number two bank on Tuesday forecast that economic growth would be 1.8 per cent this year, declining to 1.6 per cent in 2005.

The figures are exactly the reverse of those given out last week by the KOF Institute for Business Cycle Research in Zurich. KOF predicted 1.6 per cent growth for this year and 1.8 per cent for 2005.

Last month the Swiss National Bank confirmed its 2004 forecast of “close to two per cent”, while the government has also suggested a figure of 1.8 per cent.

Alois Bischofberger, the Credit Suisse Group’s chief economist, told swissinfo that he expected growth of around two per cent in the third and fourth quarters, and 1.8 per cent for the year.

“In 2005 we expect growth to be somewhat lower than this year, mainly due to a slowdown in the global economy,” he commented

“Global GDP [Gross Domestic Product] growth will certainly be lower than this year, and this will have an impact on the Swiss economy, which is very much dependent on foreign demand,” he added.

Global slowdown

Credit Suisse economists at a presentation in Zurich said domestic demand would not be enough to offset weaker economic stimuli from abroad.

But exporters were well equipped to deal with increased foreign demand, with free capacity and improved efficiency and competitiveness, they said.

The bank forecast that export-oriented companies would be faced with rather more difficult market conditions in 2005.

It added that the strong global investment activity in recent quarters was likely to subside, although it was not completely played out.

Exports of goods and services are predicted to rise by 4.3 per cent this year and 3.0 per cent in 2005.

“There will be a slowdown in export growth but no decline in overall exports,” said Bischofberger.

Stabilising role

Credit Suisse said consumption by private households and the public sector had played a stabilising role on economic activity in recent difficult years and would probably continue to do so in 2004 and 2005.

It noted that households had increased their consumption levels, despite job worries and turbulent financial markets.

“This is a very positive development and I expect it to continue unless there are increasing fears about job security and well being in old age,” Bischofberger told swissinfo.

“If economic policy achieves viable solutions as far as old-age pensions are concerned, I think private consumption will continue playing this supportive role,” he added.

Private consumption is expected to grow by 1.6 per cent this year, falling slightly to 1.4 per cent in 2005.


On the labour front, CS believes that the unemployment rate will decline slowly from 3.8 per cent to 3.6 per cent next year.

Here too, the KOF Institute had its figures in reverse order, predicting a slight increase in 2005.

“Experience shows that GDP growth above 1.5 per cent usually brings a decline in the unemployment rate,” commented Bischofberger.

“For both 2004 and 2005, we expect growth above one and a half per cent, and this in our view means there will be a very moderate decline in the unemployment rate.”

The bank said the general employment picture hid some large differences between individual regions and industries.

There was a “pronounced dearth” of specialist workers in several areas, including information technology and communications (ITC), engineering, biotechnology, financial ITC and consulting.

No price instability

In its forecast, Credit Suisse said there was no danger of price instability in Switzerland. Intensifying competition on the international and Swiss domestic goods markets was pushing prices down.

An expected appreciation of the Swiss franc would also help keep inflation at bay. The bank forecast an inflation figure of 0.7 per cent for this year and 1.0 per cent for 2005.

Bischofberger did agree with the KOF institute on one aspect – that the effects of rising oil prices would have only a limited effect on the Swiss economy.

“If you look at the average in the OECD [Organisation for Economic Cooperation and Development] countries, the dependency on oil is lower in Switzerland, and this has to do with the structure of the Swiss economy – the service-oriented structure, for example.”

“And a second factor is the appreciation of the Swiss franc vis-à-vis the euro, which contributes to holding down imported inflation and also oil price-related inflation,” he explained.

swissinfo, Robert Brookes in Zurich

In brief

Credit Suisse forecasts:


GDP 1.8%
Private Consumption 1.6%
Exports 4.3%
Imports 4.2%
Unemployment rate 3.8%
Inflation 0.7%


GDP 1.6%
Private Consumption 1.4%
Exports 3.0%
Imports 2.6%
Unemployment rate 3.6%
Inflation 1.0%

End of insertion
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