Swiss GDP beats expectations
ZURICH: The Swiss economy grew twice as fast as economists forecast at the end of 2014, indicating resilience before the central bank scrapped a currency cap that was shielding exporters.
Gross domestic product increased 0.6% in the three months through December, after an upwardly revised 0.7% a quarter earlier, the State Secretariat for Economic Affairs in Bern said in a statement yesterday.
That’s more than the 0.3% median of 18 estimates in a Bloomberg News survey.
The economy was dealt a seismic shock on Jan 15 when the Swiss National Bank announced it would no longer enforce its ceiling on the franc of 1.20 per euro and instead was increasing its charge on sight deposits.
The move sent the franc soaring against the euro, a blow to exporters who ship a big portion of their goods to the currency region, and prompted economists to predict output would shrink for at least a few months in 2015.
“The first quarter of this year surely will be hit sharply by the strong franc,” said Roland Klaeger, an economist at Raiffeisen Schweiz in Zurich. Even so, “things should slowly pick up in the second half of the year, and a recession for 2015 probably will be avoided.”
Private and public consumption, as well as the balance of trade in goods, contributed to the rise in GDP in the fourth quarter, according to the data. Output rose 2% in 2014, it showed.
The central bank hasn’t yet issued a revised GDP estimate for this year following what one corporate executive termed a currency-market “tsunami.” The bank’s previous prediction, issued in December when the cap was still in place, was for 2015 growth of about 2%.
Alternate SNB governing board member Thomas Moser said in a speech in St Gallen last week that he was “optimistic” that while Switzerland would suffer a big drop in growth in 2015, it wouldn’t slip into a “deep” recession.
Economists surveyed by Bloomberg don’t see a recession this year. Output is seen rising just 0.1% in the first quarter and then declining 0.2% in the second, according to the poll. Growth will return in the second half, bringing the annual increase to 0.9%.
SNB officials are scheduled to publish new forecasts at their next monetary-policy review on March 19, and will also hold a press briefing that day in an unusual move.
Economists surveyed by Bloomberg News in February said the central bank could cut its deposit rate, currently at -0.75%, to counter weakening economic momentum.
SNB president Thomas Jordan stoked speculation about further rate cuts last month by telling Swiss radio SRF that the franc was “clearly overvalued” and there was room for an even lower rate.
The franc has increased 12% against the euro so far this year. The currency fell 0.3% against the euro, trading at 1.0751 at 9.22 a.m. in Zurich yesterday, while against the dollar it stood at 96.06 centimes.
To support companies struggling with the strong franc, the Swiss government has modified the rules under which they may claim benefits for employees’ reduced working hours, known as Kurzarbeit in German, to include fluctuations in the exchange rate.