OECD cuts growth forecast for Switzerland

High oil prices have put the brakes on growth Keystone

The Organisation for Economic Cooperation and Development (OECD) has lowered its growth forecast for Switzerland for 2005.

The Paris-based organisation also announced on Tuesday that it was trimming its outlook for the global economy because of high oil prices.

In its autumn report the OECD said it expected Swiss gross domestic product (GDP) to grow by 2.0 per cent this year.

But it has cut its outlook for Switzerland to 1.9 per cent from 2.3 per cent.

The organisation said the economic recovery would continue next year thanks mainly to an improved export market.

“The growth of the [Swiss] economy could stabilise at around 2.0 per cent in 2005 and 2006,” said the OECD.

The OECD added that the effects of improved economic conditions would be felt in the labour market and this would likely be accompanied by continuing moderate inflation growth.

It predicted that interest rates were also set to rise as the export-dependent Swiss economy continued on its growth path.

“Continuing gradual monetary tightening is projected, with financial conditions becoming more neutral as spare production capacity is reduced,” said the OECD.

Interest rates

The Swiss National Bank has raised interest rates twice so far this year, lifting the target for the three-month money-market rates to between 0.25 and 1.25 per cent from near zero as the economy pulled away from a double-dip recession.

The OECD’s autumn report comes a month after the Swiss economics ministry revised its own forecast for 2005, warning that a surge in oil prices had dampened global trade and consumer confidence.

The OECD, which includes 30 countries, has also lowered its forecast for global economic growth next year to 2.9 per cent, down from 3.3 per cent in May.

It said the global economy would grow by 3.6 per cent in 2004, compared with the previous forecast of 3.4 per cent.

“The global expansion has slowed as the effects of the sharp increases in oil prices have set in,” said the OECD. “Households seem to have been lacking confidence OECD-wide.”

But OECD chief economist Jean-Philippe Cotis said that despite the recent oil-price turbulence there were good reasons to believe that the world economy would regain momentum in the not-too-distant future.

swissinfo with agencies

Key facts

According to the OECD, the Swiss economy should grow by 2% in 2004.
It has lowered its outlook for Switzerland for 2005 from 2.3% to 1.9%.
For the eurozone, the OECD is forecasting 1.8% growth in 2004, 1.9% in 2005, and 2.5% in 2006.
For the United States, it expects 4.4%, 3.3% and 3.6%.
For Japan, 4%, 2.1% and 2.3%.