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Swiss economy shows new signs of life

A growth in exports has provided a much-needed economic boost picswiss.ch

The Swiss economy has begun to show signs of recovery, posting its first positive quarterly growth in a year.

This content was published on November 27, 2003 - 09:13

The State Secretariat for Economic Affairs (Seco) said the upturn was mainly fuelled by a boost in exports.

The economy grew by one per cent in the third quarter of 2003, slightly exceeding expectations. Economists had predicted an average growth of 0.9 per cent.

Seco still expects the economy to have declined overall in 2003, due to a sharp drop earlier in the year. However, it expects growth to accelerate next year to reach 1.5 per cent.

“A return to significant growth is to be expected in 2004,” Seco said in a statement.

The Organisation for Economic Cooperation and Development (OECD), meanwhile, predicts growth to reach 1.2 per cent next year and 1.8 per cent in 2005.

Other growth forecasts for the Swiss economy next year range from 0.9 per cent from researchers at the Swiss Federal Institute of Technology, to 1.9 per cent from the country’s largest bank, UBS.

The Swiss National Bank said the figures were roughly in line with expectations.

Earlier this week, the bank’s president, Jean-Pierre Roth, said signs of a pick up in the economy were “pleasing even if things are modest”.

Exports boost

Switzerland slipped back into recession at the end of last year due to weak foreign demand compounded by a strong Swiss franc.

But Seco said Switzerland's export-dependent economy had been given a much-needed boost from an upturn in overseas sales to key European markets, such as Germany, Switzerland’s biggest export market.

Overseas sales rose by 5.2 per cent in the third quarter, amid an improving global economy.

However, some analysts played down the news amid sluggish economic forecasts for Switzerland's main trading partners.

"We don't expect a too dynamic development from Germany this year and since it is [Switzerland's] largest trading partner this will be a drag on growth," said Credit Suisse analyst Thomas Trauth.

The Swiss economy was badly hit when foreign businesses cut spending and investments in a bid to weather the uncertain economic climate.

Meanwhile, unemployment recently hit a five-year high and is currently running at 3.8 per cent. The government expects the level to peak early next year, then begin to drop as the economy improves.

The high jobless rate has in turn brought about a drop in consumer spending, weakening the domestic market.

But although this sector has also begun to see a tentative recovery, it remains weak, as consumers are still reluctant to spend with unemployment still riding high.

Low interest

The Swiss National Bank slashed interest rates to near-zero levels in March in a bid to control the rising Swiss franc and avoid a so-called double dip recession – a recession followed by a short recovery followed by another recession.

Earlier this week, the OECD recommended that the central bank keep interest rates low until an upturn is assured.

"According to indicators, a recovery is about to get underway," the OECD said in its twice-yearly economic outlook. "Its strength will depend on a pick up in exports, which should be stimulated by a depreciation of the franc."

However, more than 40 per cent of Swiss businesses believe the best solution to the damaging effects of the strong franc is to join the Euro zone, according to a survey by the news agency, Reuters.

swissinfo with agencies

In brief

The economy grew by one per cent in the third quarter of 2003.

The State Secretariat for Economic Affairs (Seco) said although the economy is expected to decline overall for 2003, growth will accelerate next year.

Switzerland's export-dependent economy has been given a boost by an increase in overseas sales to key markets, such as Germany.

Overseas sales rose by 5.2 per cent, amid a recovering global economy.

However, unemployment is expected to remain high until later next year, keeping consumer spending low.

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