Economic fundamentals

The SNB has projected 2007 gross domestic product (GDP) growth at 2.5 percent. First-quarter GDP growth was 2.4 percent year-over-year, which is above the so-called “trend rate of growth” of 1.5 to 1.75 percent, notes Ideaglobal’s Powell. Economists refer to trend growth as the rate that a country’s economy can grow at without causing inflation.

“The outlook for the Swiss economy is upbeat,” Averall says. She expects 2007 GDP to ultimately come in at 2.4 percent.

“Household spending is forecast to rise 1.9 percent this year, in line with last year’s figures,” she says. “The strong labor market is the main underpinning of consumer confidence. We expect unemployment for the year to come in at 2.9 percent, down from an average jobless rate of 3.3 percent in 2006 and marking its lowest level in five years.”

The export sector is expected to be a positive factor for economic growth in Switzerland.

Averall expects exports to grow 6.3 percent, while imports are expected to rise 6 percent. Averall says the Swiss KOF, a leading indicator of business, feels businesses are confident that 2007 will be another strong growth year.

“The positive business environment, including the still relatively strong global expansion, impressive growth in key neighboring Germany, and robust new order growth at home is powering both production and capital spending,” Averall says.

She forecasts industrial output to rise 3.2 percent in 2007, while 3.0-percent growth is predicted for investment.