Financial experts are forecasting a difficult year for Switzerland, with growth remaining sluggish, consumer prices dropping, and the performance of the economy largely dependent on international trends.

"/> Financial experts are forecasting a difficult year for Switzerland, with growth remaining sluggish, consumer prices dropping, and the performance of the economy largely dependent on international trends.

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EMPLOYMENT

Swiss face new year of economic uncertainty

Financial experts are forecasting a difficult year for Switzerland, with growth remaining sluggish, consumer prices dropping, and the performance of the economy largely dependent on international trends.

Published: 30 December 2011 12:56 CET
Swiss face new year of economic uncertainty
KS Photo

The Swiss economy is expected to experience only slight growth in the coming year, with gross domestic product (GDP) growth estimates ranging from 0.2 to 0.5 percent.

The economic slowdown will also have an effect on the job market. Research collated from several institutions predicts a rise in unemployment from the current 3 percent to 3.7 percent.

The Federal Council is more pessimistic and has warned that the official rate of unemployment will rise to 3.9 percent by the end of 2012, a figure that could increase still further if the eurozone fails to cure its financial woes.

Manufacturing industries, such as paper, printing and textiles, will be hit hardest, although job cuts are also expected in the financial sector.

Industries struggling with a fall-off in demand and the impact of a strong franc will also see staff numbers reduced. These include retail businesses, the catering trade and makers of industrial machinery, Alexis Bill-Körber from BAK Basel Economics told the Tages Anzeiger newspaper.

The construction industry, by contrast, is not expected to suffer. The same goes for the watch-making industry, thanks primarily to exceptional sales in Asia.

On average, salaries will go up by one percent, while consumer prices will drop as a consequence of the strong franc, experts forecast. For instance, it will become cheaper to travel by car as petrol prices are reduced, said Bill-Körber.

The Swiss will continue crossing the country’s borders to shop, while online discount sites like Deindeal.ch, will continue to grow, a sign that searching for bargains is no longer taboo.

“The attitude of consumers to bargain-hunting has changed,” writes research firm Trendwatching.

On the macroeconomic side, the reconstruction of the Swiss financial sector will take precedence. With revenues on the wane and costs on the rise, banks are worried. 

“It will get even worse in 2012,” Daniel Ettlin, from the Institute of Banking and Finance at the University of Zurich, told Tages Anzeiger.

Banks will see changes to their business models due to more demanding regulations. Some smaller banks may have to outsource their back office operations or merge with institutions, said Ettlin.

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ECONOMY

How is Denmark’s economy handling inflation and rate rises?

Denmark's economy is now expected to avoid a recession in the coming years, with fewer people losing their jobs than expected, despite high levels of inflation and rising interest rates, The Danish Economic Council has said in a new report.

Published: 30 May 2023 15:46 CEST
How is Denmark's economy handling inflation and rate rises?

The council, led by four university economics professors commonly referred to as “the wise men” or vismænd in Denmark, gave a much rosier picture of Denmark’s economy in its spring report, published on Tuesday, than it did in its autumn report last year. 

“We, like many others, are surprised by how employment continues to rise despite inflation and higher interest rates,” the chair or ‘chief wise man’,  Carl-Johan Dalgaard, said in a press release.

“A significant drop in energy prices and a very positive development in exports mean that things have gone better than feared, and as it looks now, the slowdown will therefore be more subdued than we estimated in the autumn.”

In the English summary of its report, the council noted that in the autumn, market expectations were that energy prices would remain at a high level, with “a real concern for energy supply shortages in the winter of 2022/23”.

That the slowdown has been more subdued, it continued was largely due to a significant drop in energy prices compared to the levels seen in late summer 2022, and compared to the market expectations for 2023.  

The council now expects Denmark’s GDP growth to slow to 1 percent in 2023 rather than for the economy to shrink by 0.2 percent, as it predicted in the autumn. 

In 2024, it expects the growth rate to remain the same as in 2003, with another year of 1 percent GDP growth. In its autumn report it expected weaker growth of 0.6 percent in 2024.

What is the outlook for employment? 

In the autumn, the expert group estimated that employment in Denmark would decrease by 100,000 people towards the end of the 2023, with employment in 2024  about 1 percent below the estimated structural level. 

Now, instead, it expects employment will fall by just 50,000 people by 2025.

What does the expert group’s outlook mean for interest rates and government spending? 

Denmark’s finance minister Nikolai Wammen came in for some gentle criticism, with the experts judging that “the 2023 Finance Act, which was adopted in May, should have been tighter”.  The current government’s fiscal policy, it concludes “has not contributed to countering domestic inflationary pressures”. 

The experts expect inflation to stay above 2 percent in 2023 and 2024 and not to fall below 2 percent until 2025. 

If the government decides to follow the council’s advice, the budget in 2024 will have to be at least as tight, if not tighter than that of 2023. 

“Fiscal policy in 2024 should not contribute to increasing demand pressure, rather the opposite,” they write. 

The council also questioned the evidence justifying abolishing the Great Prayer Day holiday, which Denmark’s government has claimed will permanently increase the labour supply by 8,500 full time workers. 

“The council assumes that the abolition of Great Prayer Day will have a short-term positive effect on the labour supply, while there is no evidence of a long-term effect.” 

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