Cautious optimism for Swiss economy

Consumer spending picked up over the past few months Keystone

The Swiss government has nudged up its growth forecast for this year to 1.8 per cent, citing the global economic upswing over the past few months.

The announcement came as the Organisation for Economic Cooperation and Development (OECD) told Switzerland it needed to boost production and get a tighter grip on public spending.

On Friday the State Secretariat for Economic Affairs (Seco) said it was upgrading its previous forecast for 2006 by a tenth of a percentage point.

“The government’s panel of experts expects that economic expansion in 2006 and 2007 will broaden and increasingly filter through to the jobs market,” it said in a statement.

Separate data published by Seco on Friday showed that unemployment climbed slightly in December to 3.8 per cent from 3.7 per cent the previous month.

Seco warned that economic growth, which is largely being driven by exports and solid domestic consumer spending, would not be spectacular. Officials said companies were reporting full order books and more investment activities.

The Swiss National Bank and the country’s largest commercial bank, UBS, were slightly more optimistic in their latest forecasts. They predicted growth of two per cent for this year.

Limited hope

But Délia Nilles of the Créa Institute for Applied Macroeconomics at Lausanne University cautioned against raising hopes too high.

“Any growth below two per cent is unlikely to have a major impact on the labour market. A rate of 1.5 per cent or 1.8 per will just be enough to keep the engine going.”

Companies would need to increase productivity, hire more staff and raise salaries for growth to be sustainable, she told swissinfo.

More than 150,000 people in Switzerland were registered as jobless last month – the highest rate since April 2005.

Seco, however, forecast that the economic upswing would bring more jobs, with unemployment expected to fall to 3.5 per cent later this year.

Officials also revised down their 2006 inflation forecast to 1.0 per cent from 1.3 per cent in their previous economic outlook.

More competition

Meanwhile the OECD said on Friday that the Swiss government must increase efforts to control public spending.

In its latest report, the organisation reiterated that reforms were necessary to boost growth potential and promote more competition.

The report called for a reduction in red tape, reform of Switzerland’s bankruptcy law and improvements to the higher-education system.

It stressed that more needed to be done to improve childcare facilities and recommended an overhaul of welfare programmes, as well as reforms to the country’s complex tax system in the long term.

swissinfo with agencies

In brief

Unemployment rates in comparison:

Switzerland: 3.8% (Dec)
Ireland: 4.3% (Nov)
Britain: 4.8% (Sept)
Austria: 5.2% (Nov)
Italy: 7.5% (Sept)
EU average: 8.3% (Nov)
France: 9.2% (Nov)
Germany: 9.3% (Nov)
Poland: 17.4% (Nov)

Key facts

Growth forecast 2006:

Seco: 1.8%
Swiss National Bank: 2.0%
UBS: 2.0%
Credit Suisse Group: 1.7%
Institute for Business Cycle Research – KOF: 1.5%
Basel Economics: 1.8%
OECD: 1.75%