Slowing world economy set to hit Swiss growth

The outlook for the domestic economy is positive Keystone Archive

Swiss economic growth is set to slow down this year, although it will still be "robust", according the economic researchers at the Federal Institute of Technology in Zurich.

In its spring forecast, the Institute for Business Cycle Research said the economy would grow by 2.1 per cent this year and by 1.6 per cent in the year 2002.

GDP growth will therefore be “running at a solid pace”, the researchers commented.

The forecast said prospects for the global economy had noticeably deteriorated since the last projections last autumn.

However, exports of goods were forecast to increase by 3.2 per cent this year and by 3.6 per cent in 2002. They benefited last year from the Swiss franc’s weakness against the dollar. They rose by 7.2 per cent, twice the rate of growth they had achieved in 1999.

Overall exports (goods, tourism and services) expanded by an appreciable eight per cent last year (compared to a five per cent increase in 1999) on the back of favourable economic conditions worldwide.

The researchers said that after a levelling-off phase in 2001, the annualised growth in exports from one half-year to the next was likely to pick up again from early 2002, matching the expected upswing in GDP growth in both the US and South-East Asia.

Total imports (goods tourism and services) are projected to rise by 4.6 per cent this year and by 3.5 per cent in 2002, following a 6.6 per cent rise registered in 2000.

Rising import prices, which were appreciably inflated by oil price rises last year, will “shift into reverse” the researcher say.

On the domestic economy front, several factors will hamper growth but a rise of domestic demand of just under two per cent is still regarded by the authors of the forecast as “reasonably robust”.

Overall, real disposable income is projected to rise by 1.9 per cent this year and by 2.3 per cent in 2002 (compared to two per cent in 2000).

This year, employment is set to rise by 1.4 per cent, with labour productivity progressing by 0.8 per cent. The total number of unemployed will decline, with the registered jobless rate running at an annual average of 1.5 per cent this year and 1.3 per cent in 2002.

Over the next couple of years, the researchers say an anticipated fall in crude oil prices will help to bring down the rate of imported inflation.

They add that there are no immediate inflationary dangers “lurking” in the 2001/2002 forecasting period.

swissinfo