Sceptical government cuts growth forecast

Economists say the forecast is less bright than previously predicted. Keystone

The Swiss economics ministry has cut its growth target for 2005 to 2.0 per cent from 2.3 per cent, but is sticking to its forecast for the current year.

The ministry said the revised figures were the result of a surge in the price of oil and a global slowdown.

In August, government economists had predicted growth of 2.3 per cent in 2005.

But the State Secretariat for Economic Affairs (Seco) said the recovery was expected to continue in the second half of this year, with annual growth of 1.8 per cent likely in 2004.

“Growth estimates were revised slightly downward because of a somewhat weaker global economy and a further rise in oil prices,” Seco said in a statement on Tuesday.

Officials added that it was unlikely that a global recovery would falter in 2005 but they warned that a delayed recovery on the labour market was weighing on domestic demand.

“If we don’t achieve a two per cent growth rate next year, we will have a much bigger problem than forecast,” said Seco chief economist Aymo Brunetti.

Unemployment

Seco also predicted that the official unemployment rate would reach 3.4 per cent in 2005, 0.6 per cent up on a previous forecast.

For the current year they forecast an average jobless rate of up to 3.9 per cent. In September, unemployment stood at 3.7 per cent.

The 2005 inflation outlook was revised upward by 0.3 per cent to 1.6 per cent from 1.3 per cent.

Seco’s growth forecasts for 2004 are in line with outlooks by other leading economic experts, ranging between 1.6 and 1.9 per cent (see Key Facts).

For 2005, Seco’s prediction of 2.0 per cent growth comes between the 1.6 per cent forecast by the Credit Suisse Group and the 2.3 per cent anticipated by the Organisation for Economic Cooperation and Development.

Regarding unemployment figures, Seco’s outlook for this year is in line with other forecasts, which predicted a rate of 3.8 or 3.9 per cent.

But its predicted jobless figure of 3.4 per cent for next year is more optimistic than the forecasts of Credit Suisse, research institute BAK Basel Economics, and KOF, the Institute for Business Cycle Research of the Federal Institute of Technology in Zurich.

The country’s biggest bank, UBS, is alone in forecasting an unemployment rate of only 2.8 per cent.

swissinfo with agencies

In brief

The Swiss economics ministry has revised downwards its growth outlook for 2005 from 2.3% to 2%.

It also changed its forecast for the official unemployment rate from 2.8% to 3.4%.

The main reasons for the more pessimistic forecast are high oil prices and a global slowdown.

Key facts

Growth forecast (2004/2005):

Seco, economics ministry 1.8%/2.0%
UBS 1.9%/2.1%
CS Group 1.8%/1.6%
KOF 1.6%/1.8%
BAK 1.8%/1.7%
OECD 1.8%/2.3%

Unemployment rate (2004/2005):

Seco, economics ministry 3.9%/3.4%
UBS 3.8%/2.8%
CS Group 3.8%/3.6%
KOF 3.9%/4.0%
BAK 3.9%/3.6%