Swiss Government Sees Increased Growth Risks in 2009

The Swiss government said it sees ``significantly'' higher risks to economic growth next year as the credit crunch weighs on a global expansion., Bloomberg 10/2/2008 11:07:04 AM

Swiss gross domestic product will rise 1.9 percent this year and 1.3 percent in 2009, the Bern-based State Secretariat for Economic Affairs said today in a statement, maintaining its forecasts from June. Risks to the 2009 outlook have ``significantly increased,'' it said.

Switzerland's economy is cooling as financial-market turmoil hurts earnings at banks including UBS AG and Credit Suisse Group and a U.S.-led global slowdown weighs on export demand. The Swiss economy may slip into a recession early next year, the KOF economic research institute said on Sept. 29.

The Swiss economy may expand 0.3 percent next year after growing 1.9 percent in 2008, Zurich-based KOF said. The Swiss National Bank said today in its quarterly report it expects the economy to expand between 1.5 percent and 2 percent this year followed by ``considerably lower'' growth rates in 2009.

The European Commission last month cut its growth forecast for the economy of the 15 euro nations to 1.3 percent from 1.7 percent and predicted a recession in Germany, Switzerland's largest trading partner. The Brussels-based commission said it may also trim its 2009 forecast next month.

With the financial-services industry accounting for about 16 percent of GDP, the Swiss economy is more vulnerable to the global credit crunch sparked by the U.S. housing slump. The SNB along with the world's largest central banks has injected billions into the financial system to facilitate lending.

In Switzerland, a slowdown is already deepening. Manufacturing contracted for the first time in more than three years in September. A gauge of consumption dropped in August and leading economic indicators declined to a five-year low.

Swiss exports may rise 3.4 percent this year and 2.3 percent in 2009, the state secretariat said. Spending on equipment may increase 3 percent in 2008 before stalling in 2009. Consumer spending may weaken to 1.6 percent in 2009 from 1.9 percent.

The Swiss government's forecasts are based on estimates of the euro region expanding 1.4 percent this year and next. The German economy is seen growing 1.6 percent in 2008 and 1.4 percent in 2009 and the U.S. 1.6 percent and 1.3 percent.

The Zurich-based SNB last month kept its benchmark interest rate at 2.75 percent. The three governing board members will hold their next monetary policy assessment in December.

Swiss Government Sees Increased Growth Risks in 2009