Swiss Momentum to Pick Up as Euro Area Recovers, SECO Says

  • SECO sees economic expansion at 1.5% in 2016, 1.8% in 2017
  • Consumer prices expected to fall 0.4% in ’16, rise 0.3% in ’17

Switzerland’s economy is expected to gain pace next year on the back of the recovery in the neighboring euro area and despite risks stemming from the U.K.’s Brexit referendum.

Gross domestic product will expand 1.5 percent in 2016 and 1.8 percent in 2017, the State Secretariat for Economic Affairs in Bern said on Tuesday. That compared with a June forecast of 1.4 percent and 1.8 percent respectively.

“Although the Brexit referendum did lead to increased international uncertainty, it has not resulted in any major volatility on financial markets to date,” and the moderate recovery in the euro area and other countries is expected to continue, the SECO said in a statement. “This set of circumstances can be expected to lead to positive effects for Switzerland in the form of higher foreign trade volume and a gradual stabilization of the economic recovery in the country.”

Having suffered a slowdown last year due to the strong franc, momentum has picked up in recent months thanks in part to improving exports. Yet spillover effects from Britain’s vote in late June to leave the European Union have the potential to damp the region’s prospects. Moreover, Swiss consumer prices have slumped due to the overvalued currency, and last year suffered their biggest annual fall since 1950.

Swiss consumer prices are set to decline 0.4 percent this year and then rise 0.3 percent in 2017, the SECO said, in line with its last quarterly forecast. The jobless rate is expected to average 3.3 percent both this year and next, the Bern-based body said, explaining that it had adjusted its base for that index.

The SNB, which since early 2015 has pursued a two-pillar strategy of negative interest rates and a pledge to intervene in currency markets to keep the franc in check, issued a similar forecast for growth and inflation at its meeting last week. It expects the economy to expand about 1.5 percent this year, with consumer prices declining 0.4 percent. Prices will probably rise 0.2 percent in 2017 and 0.6 percent in 2018, according to the central bank.

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