Photographer: Gianluca Colla/Bloomberg

Swiss Trim Growth Outlook as SNB Set to Hold Rates at Record Low

  • SECO sees 2016 GPD at 1.4%, previous forecast was for 1.5%
  • Consumer prices expected to fall 0.6% in '16, rise 0.2% in '17

Economic momentum in Switzerland is set to be slightly slower than previously anticipated as the global economy remains beset by turmoil.

Gross domestic product will expand 1.4 percent this year and 1.8 percent in 2017, the State Secretariat for Economic Affairs in Bern said on Thursday. That compares with a previous forecast of 1.5 percent and 1.9 percent, respectively.

“The international economic context has lost momentum in recent quarters and there is no clear sign of a marked acceleration of global growth,” the SECO said in a statement.

While Switzerland has managed to avoid recession, the pace of growth has slowed due to the strong franc that has sapped exports. Because the overvalued currency has also lowered the cost of imports, the inflation rate has been negative.

The Swiss National Bank is likely to stick with its ultra-loose monetary policy when it announces the outcome of its quarterly assessment at 9:30 a.m. in Zurich on Thursday. The central bank sent the franc surging last year when it gave up its currency cap of 1.20 per euro. Yet a fresh bout of euro-area stimulus hasn’t had much of an impact, giving the SNB the leeway to hold off cutting rates further.

Consumer prices are set to fall 0.6 percent this year and then increase 0.2 percent in 2017. That compares with the last quarterly forecast for a fall 0.1 percent in 2016, with a positive reading of 0.2 percent in 2017.

Export-oriented industrial sector has been particularly hard hit by the franc, which finished last year 10 percent stronger. Sulzer AG, a pump and mining drill manufacturer, is closing its plant north-east of Zurich.

The jobless rate is expected to average 3.6 percent this year, and then decrease to 3.5 percent in 2017.

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