Switzerland downgrades economic growth for 2016

Switzerland’s economic growth will stay below its potential this year and next, the government said. Output will expand 0.9 per cent in 2015 and 1.5 per cent in 2016, the State Secretariat for Economic Affairs in Bern said on Thursday. Its previous prediction, issued in June, was for growth of 0.8 per cent and 1.6 per cent, respectively.

Economic growth has slowed after the Swiss National Bank gave up its cap on the franc eight months ago. Output suffered its first quarterly contraction since 2012 at the start of the year, yet unexpectedly rose in the three months through June thanks to investment and private consumption. The franc, which has appreciated roughly 10 per cent since Jan. 15, is weighing on exports and damping consumer prices. The SECO said it continued to “expect the economy to remain very subdued in the second half of the year and to only strengthen during the course of 2016,” according to a statement.

“The strong downward momentum in prices should gradually ease as the effects of the appreciation in the Swiss franc fade away.”

Consumer prices are forecast to fall 1.1 per cent this year, before rising just 0.1 per cent in 2016, the SECO also said. That compares with its June prediction for a decline of 1 percent followed by an increase of 0.3 per cent. The SNB, whose deposit rate is already at a record low of minus 0.75 per cent, announces its interest-rate decision at 9:30 a.m. in Zurich on Thursday. It is expected to keep its stance unchanged, according to a Bloomberg survey of economists. “Current policy is likely to remain in place, and the SNB will continue to sound very dovish,” Gero Jung, chief economist at Mirabaud Asset Management, said before the government report was published.

Bloomberg