Worries arise on Swiss economic stagnation

Worries arise on Swiss economic stagnation

The Swiss economy is going through rough times. There is pessimism in the country although the key figures are in better shape than 10 years ago. However the crisis in the capital investment occurring despite low interest rates, which should indeed encourage investment, keeps raising worries. The crucial points causing a weak economy in the country are decreasing exports besides lack of investment. According to recent reports, stagnation is expected to last until end-year. Private consumption has been the only aspect supporting economy however same is discouraged by the recent job cuts as well. Unemployment rate rises to 2.8% this year, and is predicted to reach 3% in 2003. Inflation rate forecast indicates 0.6% this year and 1.2% in 2003, both under the maximum price stability level of 2%. Average annual GDP growth indications for 2004-2010 period point to 2.1%. The economy experts foresee a 0.1% shrinking of economy this year and 1.4% growth, next year. Swiss authorities express that this is rather a slow down in the economic growth which has started to recover in the second quarter. The common opinion on the other hand is that slackened economy needs to be reactivated just as in the 90s. However, finance authorities point out to the difference between what happened in the past when the unemployment rate reached up to 6% and today's conditions. They claim that monetary policies were stricter than those of today, therefore the situation is better apart from the effects of the international markets which they have no control over. As Switzerland's economy is very much based on foreign trade, the economic recovery is closely bound to the recovery of its trading partners like the US, Japan and Europe. The last week's news came in with the EU decision to include more countries into the Union. Switzerland takes this as an opportunity to penetrate in new markets under the roof of EU, with which it has well established bilateral political and economic agreements. Most of the existing bilateral trade agreements will apply for the new accession countries too. Hence, Switzerland will have the chance to get into trading with these new markets. The new members such as Poland, Lithuania, Hungary, Slovenia, mostly former communists, are seen as great potential customers that might serve as support to the declining Swiss economy. Yet, authorities warn Swiss firms to be cautious about Germany that has long been active in the East European market. As already acknowledged, Switzerland in the past was not willing to join the EU membership even partially, with the concern of not sharing the country's wealth with poorer member states. However, being in a weaker economic and financial state now, the country admits being isolated in such a way from the rest of Europe would provide no benefit in long term. So it gives signs of a more compromising stance towards EU.