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Swiss Economy To Be Stable in 2020

Swiss Economy To Be Stable in 2020

13 December 2019

Swiss economy is forecasted to remain stable next year, according to government and the central bank. Forecasts do not predict significant growth before 2021. The SNB kept unchanged its monetary policy.

Stable 2020

                According to government experts the economy in Switzerland will remain mostly as it is until 2021, with predicted growth only at level of 0.9% at the end of this year, 1.7% in 2020 and 1.2% in 2021. A huge part of growth next year is expected to come from sporting events, like Summer Olympics in Tokyo, so one-off events will be responsible for economic growth, not good production results, for instance. The quarterly forecast by the groups of experts close to the government sees construction activity slowing down next year. Also, there is predicted weaker export results than in previous four years, which is blamed on harsh international economic situation, mainly in Germany and eurozone. Germany is the most important trading partner for Switzerland. Additionally, Swiss economy remains stable mainly due to low unemployment rate at the level of 2.3% currently and good results of chemicals, pharmaceutical sector that provide strong demand even in time of slow economy growth.

SNB Keeps Rates

                On Thursday the Swiss National Bank decided to keep its monetary policy as it is with record negative interest rate of minus 0.75. Also, the SNB reiterated it is willing to intervene on the foreign exchange rates market if it is necessary taking into the account the overall situation of currencies. According to the statement from the SNB, Swiss franc exchange rate remains now almost unchanged comparing to September 2019. It is highly valued against other currencies, whereas the foreign exchange market is “fragile”. Thus, the negative rates policy combined with ongoing willingness to intervene serves as counteract to the attractive exchange rate of CHF – investors are eager to buy Swiss francs. The SNB with its policy try to stabilize CHF exchange rate and at the same supports economic activity. In the statement after Thursday’s meeting the SNB also acknowledged that “Various central banks eased their monetary policy in the autumn in light of modest inflation and the economic risks” and  that they also gave signs they “would probably leave their policy rates at a low level for an extended period of time.” The SNB is then on the same page as many other central banks.

SNB’s predictions

                The SNB also predicted economic data for the near future in its statement after Thursday’s meeting. Its forecast for economic growth is 1% at the end of 2019 and between 1.5% and 2% next year. The central bank also sees next year growth mainly driven by sporting events, not any sustainable growth in demand for Swiss goods or better trade. When it comes to inflation, the SNB put conditional forecast for next quarters at a slightly lower level than it did in September. For 2019 inflation is predicted to be at 0.45%, and for 2020 at 0.1%, with 0.5% for 2021. This forecast is based on the assumption that interest rates remains as they are throughout next two years.

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