Without Big sporting events Swiss economy slows in 2017

Switzerland economy will fall short of 1 per cent growth this year, the government said on Thursday, the weakest performance in eight years at least partly the result of a lack of global sporting events.
The State Secretariat for Economic Affairs (SECO) said it now expects economic growth of 0.9 percent in 2017, below its June forecast of 1.4 per cent.

It would be the lowest growth figure since the economy shrank 2.2 percent in 2009 during the global financial crisis.

Events like the Olympics or major international soccer tournaments, absent from this year’s calendar, fill the coffers of Swiss-based organizations such as the International Olympic Committee or FIFA, and boost the country’s GDP accordingly.

The downgrade at least in part reflected lower income for sporting bodies in the final quarter of 2016 after picking up revenue such as from TV licenses in the first half for events the Euro 2016 soccer tournament and the Rio Olympics.

Overall, meanwhile, the Swiss economy is only gradually returning to a dynamic growth path, SECO said.

Manufacturing and the hotel and catering industry continued to recover from the slump of the last few years, but sluggish growth in most other service sectors offset this, it said.

SECO said it expected GDP growth to accelerate to 2 percent next year, citing stronger global growth and a pick-up in Swiss exports, aided by recent weakening of the Swiss franc.

In a bright spot, exports increased 3.9 percent in August, with the country’s embattled watch sector also logging a 4.2 percent increase.

“There is no reason for alarm,” said SECO’s Indergand. “We expect growth to accelerate in the third quarter and to be closer to 0.5 or 0.6 percent as opposed to the 0.3 percent in the second quarter.”

No figure has been calculated for how much a lack of sports-related revenue will reduce economic growth this year, but SECO expected a similar level to 2015, when it cut GDP growth by 0.2 percentage points. Sporting events added 0.3 percentage points to GDP in 2016.

“These sporting bodies are important contributors to Swiss GDP, especially in years which have big events like the Olympics or the soccer world championships,” said SECO economist Ronald Indergand.

“But these events are cyclical and we don’t want to put too much emphasis on them from an economic point of view because they don’t employ tens of thousands of people in Switzerland and don’t affect the general direction of the economy.”

Credit Suisse earlier this week also reduced its forecast for the Swiss economy to grow at a rate of 1 percent, down from its earlier view of 1.5 percent.
Credit Suisse economist Claude Maurer said he expected the Swiss economy to gain momentum during the second half of 2017, and continue into 2018, where he forecast growth of 1.7 percent driven by increased investment by Swiss companies.

“Investments will pick up next year,” he said. “For the economy as a whole, the exchange rate is tolerable. The franc is still overvalued and is still a drag on growth, but not as much as it used to be.”