Economy is "comfortable" despite slower growth

Private consumption showed signs of stable growth at the start of 2008 Emanuel Ammon/AURA

Growth slowed sharply in the Swiss economy in the first quarter of 2008, with effects felt strongest in the financial sector.

This content was published on June 2, 2008 - 13:03

Gross domestic product (GDP) grew by 0.3 per cent on the quarter, compared with a 0.9 per cent increase at the end of 2007, the State Secretariat for Economic Affairs (Seco) said on Monday.

Despite the GDP dip, the economic outlook remains positive, according to the Swiss Economic Institute KOF.

Growth data showed that domestic sectors such as retail and telecommunications recorded strong business while financial services output dropped sharply.

The financial sector's contribution to GDP fell by 2.1 per cent at the start of 2008 compared with the fourth quarter in 2007.

Private consumption, which represents about 60 per cent of GDP, showed signs of stable growth at 0.4 per cent and increases were seen in housing, energy, food, beverages and tobacco and communications.

"It basically confirms what most observers of the Swiss business cycle have felt recently," Michael Graff, KOF economist, told swissinfo.

"GDP is still growing. There is a slowdown, no one would deny that, but we are still in a very comfortable situation."

He added that despite rumours of crisis and collapses, private consumption remained strong.

"No recession"

Bernard Lambert, economist at the Pictet & Cie bank, predicted that the slowdown would continue into the next quarter.

He commented that the data also showed the different economic sectors were "moving in a variety of directions".

Seco says growth in the first quarter was mainly driven by household expenditure and investment in fixed assets and software.

Total investment increased by 1.2 per cent, with growth in medical devices, precision instruments and vehicles increasing above average.

Exports of goods rose by 1.0 per cent while that of services remained almost stagnant at 0.2 per cent. Imports of goods and services dropped by 0.26 per cent and 6.1 per cent respectively.

"Services exports are probably the item which might be most affected by the international financial crisis, and it is still positive. As the Swiss financial sector contributes quite a lot to Swiss service exports, that's good news," Graff said.

"The general picture is basically as we expected, with exports slowing down from the very high levels they had in recent years and GDP slowing down from the very high level it showed in recent years."

Graff said that would happen even without the international financial crisis and the slowdown as GDP had been growing above potential for some time.

"But there is no sign of a recession, nothing really to be worried about," he added.

KOF predicts GDP potential growth of around 2.0 per cent for 2008, and the Swiss National Bank expects growth between 1.5 and 2.0 per cent this year.

swissinfo, Jessica Dacey

International growth

GDP grew by 0.7 per cent in the European Union countries in the first quarter of 2008, according to estimates published by Eurostat, the Statistical Office of the European Communities.

Germany reported 1.5 per cent growth in GDP in the first quarter, compared with 0,6 per cent in France and 0.8 in Austria. In the United States, it rose by 0.1 per cent.

Swiss GDP has experienced growth over the past four years after stabilising in 2003. There was 0.8 per cent growth in the first quarter of 2007, followed by 0.9 increases in the following quarters.

The slowdown from January to March 2008 echoes that of a dip in growth to 0.4 per cent in the fourth quarter of 2006.

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