Economy shows signs of recovery

Consumers seem to be prepared to spend more again Keystone Archive

Switzerland’s economy has begun to show signs of recovery with growth picking up in the first three months of the year.

The economy grew by 0.4 per cent in the first quarter of 2004, coming in at the lower end of government expectations.

The State Secretariat for Economic Affairs (Seco) said on Friday that first-quarter Gross Domestic Product (GDP) had risen by 1.5 per cent from a year ago – the first time in four quarters that year-on-year growth was positive.

Exports propped up growth, increasing by 1.8 per cent, while imports of goods and services decreased slightly after picking up in the second half of last year.

Merchandise imports, however, were up nearly three per cent over the same quarter last year, while services registered an increase of 0.7 per cent.

Consumers spend more

A drop in prices boosted consumer spending in most sectors, except for transport and communications.

Government spending rose during the first quarter, although officials said the increase could mostly be attributed to salary adjustments.

Investments dropped slightly, despite increased activity in the building sector.

Seco is sticking to its annual growth forecast of 1.8 per cent, and is betting on a two per cent rise next year.

But the government reiterated warnings that the economic recovery could be affected if oil prices continue to rise.

Indications of growth

Earlier this week Switzerland’s two leading economic indicators said growth would continue beyond the second quarter until at least the end of the summer.

Zurich’s Institute for Business Cycle Research said the economy should accelerate during the second quarter as new orders come in for the building and industry sectors.

Lausanne’s Créa Institute added that its long-term growth indicator was likely to rise above the 100-point mark for the first time since 2001.

Employment figures issued on Thursday seem to confirm that the economy is picking up.

Available jobs increased during the first quarter by 0.2 per cent, while the number of people in employment rose by 0.4 per cent.

Not enough

Stéphane Garelli, a professor at Lausanne’s Institute for Management Development, said it was too early to talk of sustained economic recovery.

“It’s good that the outlook is optimistic, but we still haven’t reached a level that will give the Swiss economy some breathing space,” he told swissinfo.

According to Garelli, Europe’s sluggish economic growth is affecting Switzerland’s recovery.

“The Swiss economy always takes longer to recover, so things have been made worse by the slow recovery in France and Germany.”

Recent figures show that GDP growth in the United States and Japan rose by around four per cent during the first quarter.

Aymo Brunetti, Seco’s chief economist, said the structure of the Swiss economy was slowing recovery.

“We should benefit from better economic results in the United States, Asia and Europe,” he said.

“But any improvement is outweighed by problems such as a lack of domestic productivity.”

swissinfo with agencies

Key facts

The Swiss economy grew by 0.4 per cent during the first quarter.
First-quarter Gross Domestic Product rose by 1.5 per cent.
The government expects growth to reach 1.8 per cent this year and two per cent or more in 2005.