Swiss economy stagnates

According to leading analysts such as Jan Poser from Sarasin, recent economic data indicates that Switzerland is on the brink of a recession as the economy is stagnating in the final quarter.

The office of Economic Affairs announced yesterday that year-on-year growth has slowed by 1 percent to 1.6 in the second quarter and it is now most likely to be shrinking.

There is a strong indication that the Swiss National Bank will cut key interest rate again with a 0.5 percent cut the most likely outcome.

Compared to the rest of the country’s main trading partners in the euro zone, Switzerland’s economy is doing well, however, as an export-dependent economy, it is unlikely to avoid recession.

Exports have been eroded due to the turmoil in the financial markets and the longer the crisis conditions, the deeper Switzerland will be in recession during 2009.

Within the period of stagnation, consumer consumption actually increased by 0.4 percent, as did exports gains, although investments had fallen by 1.4 percent attributing to the stagnation.

The Swiss Libor rate for interbank lending has fallen by 1 percent and it is hoped that any further cuts will translate into the reduced cost of real borrowing.

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