Further evidence of economic recovery

The latest report from the Institute for Business Cycle Research in Zurich has given a highly positive forecast of Switzerland's economic prospects.

The latest report from the Institute for Business Cycle Research in Zurich, issued Friday, has given a highly positive forecast of Switzerland’s economic prospects.

The Institute has revised its economic growth rate up to 2.4 per cent for the current year. In its autumn report, it forecast a 1.7 per cent rise in GDP.

But it said it had underestimated the rate of economic recovery in the second half of 1999.

Domestic demand expanded strongly in 1999 supported by favourable economic, fiscal and monetary policy conditions, says the report. Private consumption rose by 2.2 per cent and is forecast to grow by 1.9 per cent this year.

Growth is being fuelled by the worldwide economic boom, especially in Europe.
“The Euro-zone and European Union is in a fine economic condition,” says Professor Bernd Schips, the director of the Institute. “And Swiss exports are particularly directed to the EU.”

The spring forecast says the global upswing is set to continue for the foreseeable future.

Against this backdrop, the Institute says Switzerland should return to a state of full employment by the end of next year. The unemployment rate shoul fall to 1.9 per cent by the end of this year and to 1.7 per cent in 2001.

The Institute says these developments on the labour market will lead to steeper wage and salary increases.

But it says inflationary pressures are under control and that the Swiss National Bank should be able to gear its policy towards ensuring the economy’s steady expansion.

Analysts say there are risks to the economic upturn although they’re optimistic the pitfalls can be avoided.

“One risk is of a very very strong recovery in the Eurozone with a restrictive monetary policy from the European Central Bank” says Professor Schips. “The other risk is a hard landing in the United States coupled with a currency crisis. But the risks over the next year aren’t that high.”

by Michael Hollingdale