Is the economy set to shrink into recession?

The Swiss economy may fall into recession in 2009, according to economists at Lausanne University – the first researchers to predict such a move.

The Créa Economic Institute said on Wednesday that the economy was set to shrink for the first time since 2003 as slowdown in foreign demand spread to the domestic economy.

In a statement, the institute forecast that the economy would slip into recession in the first quarter of 2009, and would shrink by 0.6 per cent for the full year, recording its worst performance since 1991.

Reuters news agency points out that the Swiss economy has weathered the global credit crisis better than other countries so far, but export growth is slowing sharply and the banking sector has been hit hard.

Other leading economic research institutes have also been revising their forecasts downwards.

The KOF Swiss Economic Institute at the Federal Institute of Technology in Zurich sees growth slowing to just 0.3 per cent in 2009.

Economics Minister Doris Leuthard said in a recent newspaper interview that growth was likely to be below one per cent next year.