The Swiss government raised its 2012 growth forecast on Tuesday, saying robust domestic demand was helping to offset the ill effects of the strong franc on exports, though a worsening of the euro zone crisis had the potential to hamper momentum.
Switzerland’s State Secretariat for Economics (SECO) now sees growth of 1.4 percent for 2012, up from a March forecast of 0.8 percent. It sees inflation at -0.4 percent this year, unchanged from its earlier forecast.
“The positive growth forecasts for the Swiss economy are significantly dependent upon the assumption that European economic policy is successful in preventing an uncontrolled proliferation of the crisis into a widespread banking and financial crisis”, it said.
The Swiss National Bank – which holds its quarterly monetary policy meeting on Thursday – is also expected to lift its growth forecast from “nearly 1 percent” as the cap it imposed on the safe-haven franc last September helps shield the economy.
Switzerland earns every second franc abroad, and the strong value of the currency is hampering trade and eroding exporter’s margins. Nevertheless, thanks in part to strong consumption at home, national output expanded a more than expected 2 percent in the first three months of this year.
Tuesday’s upward revision was due chiefly to good performance of the economy in late 2011 and early 2012, the SECO said, and did not signal a more optimistic assessment of the economy’s prospects.
A severe recession in the euro zone would have a knock-on effect for Switzerland, the SECO also said.
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