Swiss Government Sees ‘Modest’ Growth, Warns of Short-Term Risks

  • SECO sees economic expansion at 1.4% in 2016, 1.8% in 2017
  • Consumer prices expected to fall 0.4% in ’16, rise 0.3% in ’17

Economic momentum in Switzerland is expected to pick up next year as the recovery in the neighboring euro area gains steam, the government said, confirming its last quarterly forecast.

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, leaving projections unchanged from March.

“A range of economic indicators suggests that the global economy will develop fairly positively this year and next,” the SECO said in a statement. In the short term growth prospects are “plagued by a large number of uncertainties and risks” including the U.K. vote on European Union membership, it said.

The Swiss economy has been struggling to regain its footing after the franc surged against the euro in early 2015 following an exchange-rate policy reversal by the central bank that caused exports to sag. Thanks to a drop in the price of crude oil and because the overvalued currency made imports less expensive, the inflation rate also dropped below zero.

The Swiss National Bank, whose mandate is for positive rates of inflation below 2 percent, is due to announce the outcome of its quarterly monetary-policy review at 9:30 a.m. on Thursday. It is expected to keep its deposit rate unchanged at a record low of minus 0.75 percent and reaffirm its pledge to intervene in currency markets, according to a Bloomberg survey of economists. A press conference featuring President Thomas Jordan and his fellow governing board members is scheduled for 10 a.m. in Bern.

Appreciation pressure on the franc is likely to intensify because of Britain’s June 23 EU referendum. While Switzerland’s exports to the U.K. were only a third of those to Germany last year, financial-market turmoil caused by a so-called Brexit could hamper the Swiss.

Swiss consumer prices are set to fall 0.4 percent this year before rising 0.3 percent in 2017, the SECO said. That compares with the last quarterly forecast for a decline of 0.6 percent in 2016 and an increase of 0.2 percent in 2017. The jobless rate is expected to average 3.6 percent this year, and 3.5 percent in 2017.

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