OECD forecasts healthy growth for Swiss economy

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The Organisation for Economic Development (OECD) says Switzerland's economy will grow by 1.25 per cent this year, and "should accelerate in 2006".

In its autumn report for the world economy, the OECD said on Tuesday that exports and investment would boost Swiss output without fuelling inflation.

The organisation, which represents the world’s 30 leading industrialised nations, said on Tuesday that the improved economic situation would also improve the Swiss job market and encourage consumption.

“Whereas higher oil prices could temporarily weaken demand in late 2005 and early 2006, the persistently accommodative monetary policy and lower real exchange rate should prompt an acceleration of production by spring 2006,” the OECD said.

The OECD called on the Swiss National Bank to keep money supply loose until the recovery had taken hold, saying inflation posed little threat.

The bank is expected to raise rates by at least 25 basis points at its meeting in mid December.

Fewer unemployed

The Paris-based organisation said unemployment, currently at 3.7 per cent, should fall significantly by the middle of next year but that it is unlikely to pose an inflationary threat even if oil prices remain high since the Swiss economy still has surplus production capacity.

“The upturn could be jeopardised by any further delay in the pick-up in demand in Europe, which would also weigh on the confidence of Swiss households and firms,” the organisation said.

The OECD said, “large price increases in oil and commodities markets [had] acted as an impediment to recovery” in some parts of Europe, and expressed concern that European domestic demand was “growing below trend”.

Price stability

It said global growth had been “exceptionally vigorous”, particularly in North America and Asia and that “virtually all countries have maintained price stability in the face of the oil price shock, without compromising activity”.

It said the Asian and United States economies were providing a “powerful impetus”, and that coupled with the re-spending of oil exporters’ higher revenues had made the case for a “prolonged world expansion”, which would extend to Europe.

The OECD survey comes only two weeks after Zurich’s Institute for Business Cycle Research (KOF) said that the Swiss economy had regained strength in the third quarter and would continue to improve.

swissinfo with agencies

Key facts

OECD forecast for Swiss economy:
Economic growth of 1.25% for 2005
Private consumption
+1.4% 2005
+1.2% 2006
+1.7% 2007
Exports of goods and services
+5.0% 2005
+7.7% 2006
+7.1% 2007