OECD bets on upbeat Swiss economy

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Switzerland's economic growth is set to accelerate this year before slowing slightly in 2007, according to the Organisation for Economic Cooperation and Development.

But the Paris-based grouping warned on Tuesday that the improved outlook should not lead the Swiss government to cease efforts to control spending and implement reforms.

The OECD revised its 2006 forecast for the Swiss economy upwards on Tuesday from 1.7 per cent to 2.4 per cent. In 2007, growth is set to ease slightly to 1.8 per cent.

Switzerland’s economy, whose growth rate has long been lagging behind those of other industrialised nations, is this year set to perform better than in most eurozone countries. On average they are expected to grow by 2.2 per cent.

In an upbeat assessment, the OECD said growth in 2006 should be stimulated by the “impulse provided by the European recovery”.

Despite some easing in 2007, growth would probably remain “fairly robust and above potential”, the organisation commented in its second Economic Outlook this year.

Unemployment

The OECD, of which Switzerland is a member, commented that with economic activity firming a gradual tightening of monetary policy was “appropriate”.

Recently, the Swiss National Bank has raised interest rates twice in quarter per cent increments, pushing them effectively to 1.25 per cent. It has also signalled that it will tighten credit further as the economic recovery seems broadly based.

Swiss unemployment should fall to 3.9 per cent this year from 4.3 per cent in 2005 and is expected to drop further to 3.5 per cent in 2007, the OECD said.

In its assessment the organisation said the improved economic situation should not lead to a relaxation of efforts to control public spending, particularly in the social sector.

Reform process

Efforts should also continue in the reform process in product markets aimed at strengthening potential growth, which was weak.

OECD analyst Claude Giorno, who is responsible for the Switzerland dossier, told the SonntagsZeitung newspaper on Sunday that reforms were too slow in the telecommunications and agriculture sectors.

The fact that the economy was doing well presented a problem, he added.

“The urgency of domestic competition and social reforms is considered less important. That can lead to unpleasant surprises in the not too distant future.

“We see evidence of self-satisfaction which is out of place,” he commented.

His comments echoed an OECD report last month that warned Switzerland would not remain among the world’s richest countries if it failed to carry out more reforms and open its markets to competition.

swissinfo with agencies

In brief

The Economic Outlook came out as the OECD was holding its forum and annual ministerial council meeting in Paris.

OECD ministers and other participants are debating economic and trade issues at the two events.

Swiss Economics Minister Joseph Deiss and the head of the State Secretariat for Economic Affairs, Jean-Daniel Gerber, are representing Switzerland.

Deiss is using the occasion to underline the Swiss position at the Doha Round of world trade talks and to call for renewed dynamism to bring about a successful conclusion.

Key facts

OECD forecast for Swiss economy:
GDP growth: 2.4% in 2006 and 1.8% in 2007.
Inflation: 1.1% in 2006 and 0.8% in 2007.
Unemployment rate: 3.9% in 2006 and 3.5% in 2007.