March 20, 2018 / 8:02 AM / 8 months ago

Swiss see risk to global economy from U.S. protectionism

ZURICH (Reuters) - The Swiss government warned on Tuesday that U.S. protectionism could undermine an economic upturn that prompted it to raise its growth forecasts for the export-led Swiss economy.

Like the Swiss National Bank last week, it also said the Swiss franc’s welcome recent weakening against the euro could be reversed should tensions on financial markets erupt again, creating more headaches for exporters.

The State Secretariat for Economic Affairs (SECO) now expects the economy to grow 2.4 percent this year and 2.0 percent in 2019.

SECO said it thought short-term positive and negative risks for the global economy were balanced.

“The global upturn could last longer than expected and the Swiss franc could depreciate further in the context of continued good international economic conditions. This in turn would give the Swiss economy a further boost,” it said.

“However, the protectionist measures recently announced in the U.S. pose negative risks for the global economy.

“Although the tariffs recently imposed on metal imports are unlikely to affect the Swiss economy very much, any escalation to a trade war between the major economic zones would have a considerable dampening effect in the medium term,” SECO said.

The risk of turbulence on financial markets remained, perhaps triggered by unexpectedly rapid normalization of monetary policy in the United States. “This could create further upward pressure on the Swiss franc,” it said.

SECO cited as potential pitfalls political uncertainty in Italy, a lack of clarity about Brexit negotiations and unanswered questions about neutral Switzerland’s ties to the European Union, the country’s biggest export market.

“In Switzerland itself, there is also a risk that the construction sector will undergo a sharper correction than is forecast,” it added.

Reporting by Michael Shields; Editing by Catherine Evans

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