The prognosis for the Swiss economy continues to worsen with forecasters now fearing the deepening recession will last a minimum of two years.
The KOF Swiss Economic Institute said on Thursday that the economy would shrink by 2.4 per cent this year, exports would continue to slump and the jobless rate would rise to 4.8 per cent (nearly 200,000 out of work) in 2010.
The KOF spring forecast was significantly worse than in December when the institute predicted a fall in gross domestic product (GDP) of 0.5 per cent.
Mindful of previous rosier assessments that have had to be revised, the report also warned "the assumptions upon which this forecast is based could easily prove to be too optimistic".
"One of our assumptions is that we won't a see a bank run in Europe. We can't rule out that there will not be another Lehman Brothers [the collapsed United States investment bank] but we assume there won't be," KOF head Jan-Egbert Sturm told swissinfo.
Other headline figures in the new forecast predict a 12 per cent decline in exports this year and a slight decline in the previously robust consumer spending. KOF expects 2010 to continue the negative slide with a 0.3 per cent year-on-year drop in GDP.
The report blamed the decline in Swiss economic fortunes on the dramatic "collapse" of the export industry in the last three months of 2008 as the impact of recession in other countries suddenly hit home.
"In the summer and early autumn [of last year] the Swiss economy performed relatively better than other economies," Sturm said. "That was in part due to a relatively robust domestic economy. But ultimately we are an open economy and we have to be affected by the world economy. Switzerland has caught up with Europe."
The Swiss government and central bank have tried to halt the slide with economic stimulus packages and a rapid lowering of interest rates to virtually zero.
But KOF was cautious about predicting the impact of these measures with the recession showing no signs of abating.
"It will help to a limited extent, but it is very difficult for a fiscal policy to support the export market. It is difficult to say how this may affect the Swiss economy in the near future," Sturm said.
Up and down
KOF also recognised that the ongoing row over tax evasion and promises by Switzerland to reform banking secrecy could have a negative effect on the financial industry.
The report predicted this would "further shrink the foreign private wealth managed by Swiss banks".
The one hope that Sturm could see for the Swiss economy was a reversal of the adage that "what goes up must come down".
"We have already reached the bottom in some sectors, so it must go upwards. Many firms around the world have put their investment plans on hold, but that doesn't mean they can't be reactivated when the global economy picks up," he said.
swissinfo, Matthew Allen in Zurich
More Swiss manufacturing names have announced poor 2008 results.
On Tuesday textile unit and car parts manufacturer Rieter posted a net loss of SFr397 million ($354 million) compared with a SFr211.5 million profit in 2007. The group was forced to turn to a consortium of banks and to a wealthy industrialist last month to help fund its restructuring programme.
Georg Fischer, machinery, construction and car manufacturing supplier, announced a fall in profits attributable to shareholders on Tuesday, from SFr232 million in 2007 to SFr56 million last year.
Engineering concern Sulzer bucked the trend in February by posting increased profits of SFr323 million in 2008, but warned that performance was likely to drop this year.
Swissmem, the umbrella body for the machinery, electrical and engineering industry, said last month that orders had fallen by a third in the last quarter of 2008.
Official government figures, released in March, showed real GDP shrinking 0.6% in the last quarter of 2008 compared with the same period in 2007 (-0.3% quarter on quarter). Provisional figures showed the economy growing by 1.6% for the whole of 2008.
The export of goods and services plummeted by 8.1% quarter on quarter while imports also fell by 5.8%. Domestic consumer spending grew only by 0.1%.
Economists are predicting tougher times for this year and next:
Seco: -2.2% GDP in 2009, 0.1% in 2010
KOF: -2.4% 2009, -0.3% 2010
SNB: -2.5% to –3% 2009
UBS Wealth Management: -1.2% 2009, 0.2% 2010
Credit Suisse: -0.6% 2009
BAK Basel Economics: -2.1% 2009, 0.6% 2010
OECD: -0.2% 2009, 1.6% 2010