The International Monetary Fund (IMF) believes there is room for interest rate cuts by the Swiss National Bank (SNB) if the economy shows a more marked slowdown.

The IMF forecast, released on Tuesday,said that Switzerland's economy would grow by just two per cent in 2001, after logging a gain of 3.4 per cent in 2000.

However, the IMF said that even this reduced growth forecast could be tempered because it "viewed the growth projection as subject to downside risks from the weakening global economy".

The Washington-based IMF said that Swiss inflation "remains subdued", with a projected average annual rate of 1.4 per cent in 2001. The organisation welcomed Switzerland's recent interest rate cut, taking into account the country's low inflation, its strong external current account and the improved performance of the Swiss franc.

The Swiss National Bank left interest rates unchanged earlier this month after easing them in March, but traders expect a further easing, possibly as early as next month.

The IMF praised the Swiss authorities for maintaining sound macro-economic policies, which it said had helped create a strong economic recovery and lower unemployment without sparking inflation.

"Looking forward, directors considered that the main challenge is to pursue more vigorously the structural reforms that are needed to improve Switzerland's long-term growth prospects," the IMF said.

swissinfo with agencies

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