Slowing growth predicted for Swiss economy

Economic growth in Switzerland will slow gradually over the next two years, according to the Swiss Institute for Business Cycle Research (KOF).

In its autumn report, released on Thursday, KOF forecast that Gross Domestic Product would grow by 2.9 per cent in 2000, before slowing to 2.2 per cent in 2001 and 1.5 per cent in 2002.

Petta Huth, a researcher at KOF told swissinfo: “We have had very good growth rate up to now but we simply can’t maintain this pace. That’s normal when the economy is limited by the size of the labour market.”

Inflation is forecast at 1.7 per cent for this year, easing back to 0.8 per cent in 2001/2002, and therefore removing pressure on the Swiss central bank to raise interest rates.

The institute said its latest forecast was based on continuing high oil prices of $27.80 a barrel for 2000, $24.30 in 2001 and $22.00 in 2002.

KOF believes the unemployment rate will hover at around two per cent for the next two years.

It is also expecting Swiss exports to decline, caused by a predicted slowdown in the global economy along with an expected recovery in the Swiss franc’s value against the US dollar.

KOF said “the Swiss franc’s nominal trade-weighted value should climb by 4.2 per cent next year as the currency is expected to make strong progress against the US dollar during the course of 2001”.

It added that growth in the domestic economy will be driven lower in 2001/02 by a slowdown in capital spending and construction investment.

As far as consumption is concerned, KOF expects “private consumer demand will remain a major pillar underpinning overall expansion in the economy’s growth”. However, it says consumer spending will slow slightly because of a decline in the number of new jobs being created.

by Tom O’Brien