Economic growth set to slow in 2005

The barometer of the Swiss economy is holding steady for now Keystone

The Swiss economy will continue to grow until the end of 2004, buoyed by industry and the retail and insurance sectors, according to a leading think-tank.

But it warns that, based on orders, the pace of growth can be expected to decline in the New Year.

The KOF Institute for Business Cycle Research says a survey of 6,700 companies suggests overall activity increased in the third quarter of 2004, despite little improvement in the tourism and construction industries.

Larger industrial companies and exporters experienced the greatest growth.

“In the short term, economic growth should continue at the same rate as until now,” KOF said in a statement.

“In the medium term, however, the industrial, construction and retail sectors show more reserved expectations than in the last [quarterly] survey,” it said, adding that it anticipated “a decline in the economic dynamic from the start of 2005”.

The Swiss government has said it expects the economy to grow by 1.8 per cent this year and 2.0 per cent next year. KOF has forecast a more moderate 1.6 per cent growth in 2004 and 1.8 per cent in 2005.

Not enough

Around one third of companies surveyed said they had increased production in October in comparison with the previous month, whereas 49 per cent reported no change. Less than 21 per cent reported a drop in production.

But declining orders could mean a tough New Year for some.

Even if demand holds for Swiss industrial products, 44 per cent of companies still say it’s not enough.

Only half of construction companies describe their order volumes as satisfactory, although a third report orders are increasing.

In the retail sector, growth is forecast to continue into 2005, but at a slower rate, with large distributors favoured over small and medium-sized retailers, the institute said.

swissinfo with agencies

Key facts

In the KOF survey, 30% of industries reported increased production, 49% said production was static, while 21% reported declines.
Construction: Half of all respondents report a satisfactory volume of orders.
Retail: Most report a continuing rise in sales.
Hotels: Revenues decline 3% and there is little optimism.
Banks and insurers: Report modest declines.

In brief

The KOF surveyed 6,700 companies in industry, construction and services, concerning their quarterly economic outlook.

67% responded across the sectors.

Based on orders, sales are expected to grow to the end of the year, before tailing off.