Swiss govt ups growth f'cast ahead of SNB meet

Reuters News
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Posted: Mar 15, 2012 3:59 AM
Swiss govt ups growth f'cast ahead of SNB meet

ZURICH (Reuters) - The Swiss government raised its 2012 growth forecast a touch on Thursday, saying with the euro zone's debt crisis easing there was a good chance the economy had put the worst behind it.

The Swiss National Bank, which capped the soaring franc at 1.20 per euro on September 6 to ward off deflation and recession, announces its quarterly decision on monetary policy at 0830 GMT.

Signs of economic momentum gaining force reduce the likelihood of it trying to shift the cap higher despite calls from left-wing politicians and trade unions to help the struggling tourism industry and exporters.

Switzerland's State Secretariat for Economics (SECO) now sees growth of 0.8 percent for 2012, up from a December forecast of 0.5 percent, it said on Thursday, adding that leading economic data since the start of the year had shown initial signs of stabilisation among both businesses and consumers.

"This indicates that the bottom of the economic cycle has been reached," it said in a statement.

With the franc still some 30 percent stronger than when the financial crisis hit in 2008, the SECO revised its 2012 inflation forecast down a notch to -0.4 percent, from -0.3 percent. In 2013 it sees prices rising 0.4 percent, up from its December view of 0.3 percent.

"Despite the trend towards stabilisation in the past few weeks and months the euro zone debt crisis still constitutes a considerable risk to the development of the global economy and therefore also for Switzerland," the SECO said.

The SNB will also issue new growth and inflation forecasts.

Economists polled by Reuters expect the SNB to continue with the cap at 1.20 and rates at rock bottom, as well as to stick with its growth forecast of 0.5 percent for this year.

At its last policy review in December, it gave a 2012 growth forecast of 0.5 percent with inflation seen at -0.3 percent.

The euro zone is Switzerland's biggest trading partner. The bloc's debt woes, which prompted safe-haven investors to push the franc up strongly against the euro, have particularly hit the Alpine state's export and tourism sectors. Strong trade with Asia has helped to offset some of that slackness.

The strong Swiss franc has blighted corporate results ranging from pharmaceutical firm Roche to bank UBS. Given the headwinds many companies are facing due to slow global demand and the unfavourable exchange rate, some politicians and trade unions have called on the SNB to do more to shield the economy and weaken the franc further.

Yet SNB Vice Chairman Thomas Jordan, now heading the central bank on an interim basis after Chairman Philipp Hildebrand quit over a currency trading scandal in January, has said the central bank will not be swayed by political pressure.

(Reporting by Catherine Bosley; editing by Patrick Graham)