SECO: inflation could slide Swiss GDP forecast

8 years ago - Published in Finance, Fundamental Analysis

The Swiss government cut its outlook for 2017 economic growth in its latest forecast on Tuesday, adding it expected inflation to remain subdued.
The State Secretariat for Economic Affairs (SECO) said it expected economic growth of 1.4 percent in 2017 instead of 1.6% estimated previously in March. At the same time, projection for 2018 was retained at 1.9%.
"The slight downward adjustment compared with the previous forecast takes into account the more sluggish growth seen in the first quarter. Economic growth is expected to accelerate substantially throughout the year due to favourable economic conditions at an international level and thanks to the continued strong sentiment indicators," SECO said. 

A further marked increase in economic momentum is to be expected over the coming quarters given the promising outlook for the global economy and positive leading indicators, SECO said.

Domestic demand is expected to be a key pillar of growth this year and next. Following a rather subdued development in 2015 and 2016, consumption is forecast to grow more dynamically.

Due to low interest rates and a persistently high demand for real estate, investment in construction also looks set to gain a little momentum, SECO added.

"There still remains a significant amount of political risk in connection with the USA's stance on trade and fiscal policy and the implementation of the Brexit referendum. If these risks materialise, they would, however, not be likely to have an impact on Switzerland until the second half of the forecast period," SECO said.
It also cited "additional uncertainty" in Italy ahead of a general election.

After the economic downturn due to the appreciation of the Swiss franc, the turnaround on the job market has already begun to solidify, the government noted.

Underpinned by oil prices, inflation in Switzerland is returning to normal, the agency said. The expert group maintained its 2017 inflation projection at 0.5% and the outlook for next year was lowered slightly to 0.2% from 0.3%.

The SECO observed that the turnaround on the job market has already begun to solidify. The agency forecast the jobless rate to fall to 3.2% in 2017 and then to 3.1% in 2018.