Swiss economy facing best year for a decade
The Swiss economy is this year set to record its best performance since 1990, but the rate of growth in 2001 will be more modest, according to the Credit Suisse financial group.
At a news conference in Zurich on Monday, CS economic experts forecast that Swiss Gross Domestic Product would increase by 3.3 per cent this year and by 2.5 per cent in 2001.
They say the slowdown is attributable to slower international growth, the appreciation of both the United States dollar and the Swiss franc against the euro, the rise in the price of crude oil and the increasing shortage of skilled personnel on the Swiss labour market.
The chief economist of Credit Suisse, Alois Bischofberger, explained that the rise in oil prices was equivalent in economic terms to a decline in purchasing power.
"Based on current price trends for heating oil and petrol, this reduction is estimated to be equivalent to about two per cent of disposable income. Such a cut in purchasing power will inevitably put the brakes on other private consumption," he said.
However, he added that various mechanisms were at work to soften the impact of the rising oil price on the economy as a whole.
Bischofberger said the recent turmoil surrounding the single European currency had enhanced the appeal of the Swiss franc. Since the beginning of the year, the franc has gained almost six per cent in value against the euro.
He said the revaluation of the franc had compromised the competitiveness of exporting companies, so there could be a further weakening of Switzerland's export performance.
"However, if the increase in the value of the franc remains within the range seen so far, Swiss exporters should be able to live with the situation, especially since the majority of them are active in niche markets," he said.
Referring to the tight labour market, Bischofberger said there was bound to be upward pressure on wages.
"With employees in such short supply, companies are having to cope with attempted poaching by other organisations, as well as with higher fluctuation rates," he observed.
"Businesses want to avoid losing expertise, especially since they know how expensive it is to replace specialist staff. As a result, they are more willing than normal to increase people's wages," he added.
As for inflation, the CS economists are predicting that it will rise from the current 1.3 per cent (August) to above the two per cent mark but will fall in the early part of next year.
"The expected rise will be driven by the oil price and by the translation of mortgage rate increases into higher rents," Bischofberger said.
The annual average inflation rate for 2000 is expected to be 1.7 per cent, rising to 1.8 per cent next year.
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