Swiss growth slows as global uncertainty holds back investment

​Swiss economic growth slowed in the second quarter, with business spending suffering amid fallout from the trade war and a slump in neighbouring Germany

Swiss economic growth slowed in the second quarter, with business spending suffering amid fallout from the trade war and a slump in neighbouring Germany.

Equipment investment dropped 1%, which the State Secretariat for Economic Affairs blamed on the “uncertain environment.”

Companies have already been warning about the outlook, with a strong currency adding to problems. Gross domestic product rose 0.3% in the period.

Switzerland is feeling the effects of the uncertainty unleashed by Brexit and the US-China dispute, which is dampening demand globally and sent the haven franc to a two-year high against the euro.

The country’s central bank has responded to the currency’s appreciation with interventions to stop it getting too strong.

Adding to the headwinds is Germany, which is on the verge of recession and saw factory orders plunge in July. That’s bad news for Switzerland, as Germany is its largest export market.

“If we look at the leading indicators, the future won’t be that rosy,” said David Marmet, an economist at Zuercher Kantonalbank. “The troubles are still ahead.”

Switzerland is no stranger to fighting a strong currency, but the problem is being compounded by weak global demand.

That puts a question mark over the Swiss National Bank’s forecast for growth of about 1.5% this year. It’ll update that view at its policy assessment in two weeks.

Economists surveyed by Bloomberg see 1.3% growth, while the government is even more pessimistic, with a 1.2% forecast.

The headline output figures for the second half of last year were revised down, showing the economy fell into a technical recession.

However, because Switzerland is home to sporting bodies like FIFA, UEFA and the International Olympic Committee, quarterly data gets affected when major events are held.

When adjusted for the effects of sporting events, the economy avoided a recession, growing 0.2% at the end of 2018 and 0.6% in the first quarter of 2019.

Source: Bloomberg 

Posted on : 06 September 2019
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Last Updated : Wednesday 13th November 2019