March 1, 2012 / 8:05 AM / 6 years ago

CORRECTED-Swiss economy avoids contraction in Q4

ZURICH, March 1 (Reuters) - The Swiss economy grew by a stronger-than-expected 1.3 percent year-on-year in the final quarter of 2011, shrugging off the impact of a strong franc and easing pressure on the central bank to take more steps to tame the currency’s rise.

Compared to the previous quarter, gross domestic product expanded 0.1 percent, the State Secretariat for Economics said on Thursday, reducing the likelihood that the economy will drift into recession at the start of 2012.

Analysts in a Reuters poll had expected a contraction of 0.2 percent on the quarter and growth of 0.9 percent on the year .

“The economy may not as bad off as many pessimists had predicted,” said Swissquote analyst Peter Rosenstreich. “Despite the strong franc there is solid demand for Swiss products and in aggregate growth is bumping along.”

Investors seeking a safe haven from the euro zone’s debt troubles drove gains for the franc against the euro nearly 20 percent in the first eight months of last year, prompting the Swiss National Bank to cap it at 1.20 per euro on Sept. 6, citing the risk of deflation and recession.

But with previous years’ gains leaving the franc still nearly a third stronger than when Lehman Brothers collapsed in 2008, SNB interim Chairman Thomas Jordan has warned repeatedly that the bank stands ready to take further steps to restrain the currency if necessary.

Trade unions have called on the SNB to shift the cap towards 1.40 per euro. But economists said the fourth-quarter growth data would not provide them with further ammunition.

“We don’t expect the cap to be shifted,” said Credit Suisse economist Maxime Botteron. “Deflationary risks hardly exist any more. We expect positive inflation prints on the month ahead. So the central bank won’t introduce fresh measures.”

Moreover, the economic trough may be bottoming out: the KOF economic barometer, which forecasts the economy’s performance in six months’ time, posted its first rise in nearly a year last month.


The franc’s strength has blighted results for companies ranging from bank UBS to cement-maker Holcim . Firms in the export and the tourism sectors are particularly feeling the pinch.

The SNB forecasts growth of 0.5 percent for 2012, down from growth of 1.9 percent in 2011.

The euro zone accounts for more than half of Switzerland’s exports, so the bloc’s debt crisis has also sapped demand for Alpine exports.

Nevertheless, exports of goods grew 2.8 percent in the fourth quarter from a year earlier. Trade in chemicals and related products -- such as drugs by Novartis and Roche -- contributed strongly to that rise, the economics secretariat said.

Exports of precision instruments, watches and jewellery, which are particular popular in places like China and Hong Kong, showed positive developments, the secretariat said.

Despite the strong franc, which makes imports cheaper, imports of goods were 0.4 percent softer.

Adding to the positive momentum for the economy, the data for the third quarter was revised up. In the months between July and September, the economy expanded 0.3 percent on the quarter and 1.6 percent on the year.

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