Is Switzerland Economic Growth Slowing?

Switzerland's economic growth has been very strong, reaching 3.6 percent in the last quarter of 2007. However, the recent appreciation of the Swiss Franc could become a big obstacle for Europe's eighth largest economy in 2008.

So far, the Swiss economy doesn't look too bad. In fact, house prices rose 2.1% last year and Switzerland's current account surplus is still the largest in the OECD accounting for 17% of GDP in 2007. Yet, slowing growth in Europe and in the United States combined with a 5 percent gain in the Swiss franc against the euro since the beginning of the year, are harming foreign sales of products such as machines and precision instruments. The export sector constitutes over 50% of GDP and the franc appreciation may have the biggest impact on Swiss economy. Moreover, the financial services sector is an important part of the Swiss economy and a slowdown in international transactions of credit derivatives will hurt Switzerland more than most economies. For instance, UBS chairman Marcel Ospel quit his job on Tuesday morning as the Swiss bank wrote off another $19 billion in structured credit positions bringing the total damage from the US sub-prime implosion to about $37 billion.

Anna Fedec,
4/1/2008 9:22:03 AM