Swiss government lowers growth forecasts

The Swiss government lowered its economic-growth forecasts for this year and next, calling the franc still ‘very highly valued’ after the central bank imposed a currency ceiling against the euro.

Swiss gross domestic product will rise 1.9 per cent this year and 0.9 per cent in 2012, the State Secretariat for Economic Affairs in Bern said in an e-mailed statement on Tuesday. In June, it had forecast the economy to expand 2.1 per cent and 1.5 per cent this year and next, respectively.

The Swiss economy is showing increasing signs of a slowdown after expanding in the second quarter at the weakest pace since emerging from a 2009 recession.

The central bank on September 15 reiterated its pledge to defend a franc ceiling of 1.20 versus the euro to protect exports, while leaving borrowing costs at zero. Exports slumped seven per cent in August from the previous month, a government report showed on Tuesday.

The unfavorable constellation of the economic weakness and the strong franc may temporarily cause economic growth in Switzerland to drop, the state secretariat said. Isolated quarters of economic contraction are possible. On the other hand, the expert group thinks it’s unlikely that Switzerland will slip into a deep recession.”

The franc was little changed after the report, trading at 1.2061 versus the euro at 8:06 am in Zurich. The Swiss currency had reached a record 1.0075 on August 9.

Swiss exports may rise 3.2 per cent this year and 0.7 per cent in 2012, according to on Tuesday’s report. That is down from a previous estimate of 4.6 per cent and three per cent, respectively. Unemployment may average 3.4 per cent next year, up from 3.1 pe rcent in 2011.