Economists remain upbeat over growth

Consumer spending is a driving force of economic growth

The government has raised its forecast for Swiss economic growth for this year but warns the outlook for 2008 has become uncertain as a result of the credit crisis.

The State Secretariat for Economic Affairs (Seco) forecast of 2.6 per cent for 2007 – up from 2.3 per cent – is slightly higher than that of the Credit Suisse bank, which also published its data on Tuesday.

Seco based its statement on the healthy growth of export-oriented industries and the financial sector, as well as robust domestic consumer demand in the first half of this year.

“For 2008, Seco continues to forecast a slowdown to 1.9 per cent, but the risks have increased,” a statement by the government agency said.

It added unemployment would continue to drop to 2.7 per cent by the end of the year and to 2.4 per cent in 2008, while inflation is expected to average 0.6 per cent this year and 1.2 per cent in 2008.

Seco chief economist Aymo Brunetti said it remained difficult to gauge the impact of the credit crunch in the wake of the meltdown in the United States subprime mortgage market.

He said gross domestic product in Switzerland was unlikely to be affected in the short term, but he pointed out that rising oil prices could dampen consumer spending.

Slowdown

Economic experts at Switzerland’s second-largest bank, Credit Suisse, have increased their outlook for 2007 to 2.5 per cent, up from 2.2 per cent.

They left the forecast for 2008 at 1.9 per cent as a result of a further slackening of growth momentum.

“This year’s growth rate will not reach the peak level of last year. It nonetheless remains considerably above the country’s potential growth of close to two per cent,” a statement said.

The bank expects the slowdown of the global economy, the credit market turmoil and the sharp rise in oil prices to have only a moderate effect on the Swiss economy.

“The slowdown should even be considered welcome in view of a number of indicators suggesting that the economy has been overheating.”

Credit Suisse says the rapid production pace – added to a shortage of highly qualified workers – would stoke inflation in the medium term.

Last week the KOF Swiss Economic Institute was the first to reveal its autumn economic forecasts. It sees economic growth of 2.8 per cent this year and 1.9 per cent in 2008.

swissinfo with agencies

In brief

A country’s gross domestic product (GDP) is one way of measuring the size of its economy.

GDP is defined as the market value of all final goods and services produced within a country in a given period of time. To calculate GDP, you add consumption, investment, government spending to exports (minus imports).

Gross national product (GNP) is a measure of the increase of income to a region.

Economic outlook – comparison:

Seco: 2.6% (2007), 1.9% (2008)
KOF: 2.8% (2007), 1.9% (2008)
BAK: 2.7% (2007), 2.3% (2008)
SNB: 2.5% (2007), 2.0% (2008)
Credit Suisse: 2.5% (2007), 1.9% (2008)
UBS: 2.6% (2007), 2.3%(2008)