Amadeusz Juskowiak

Swiss economy in excellent condition oecd says

Switzerlands economy combining low unemployment financial stability and a large external payments surplus is in excellent condition and faces a satisfactory future the Organisation for Economic Cooperation and Development OECD said

This reflected the success of stable and relatively tight fiscal and monetary policies followed by the government it said

The OECD in its annual report on Switzerland picked out some signs of a slowdown in activity and a slight pickup in inflation this year but said these gave no cause for concern

The study forecast a decline in Gross Domestic Product growth to 175 pct this year from an estimated two pct in 1986 and a small rise in consumer price inflation to 125 pct after last years sharp fall to 075 pct from 36 pct in 1985

But it said job creation should continue to absorb a modest increase in the workforce leaving the unemployment rate unchanged at around one pct the lowest in the 24industrial nation OECD area

Assuming an average exchange rate of 171 Swiss francs to the dollar this year against 169 in the second half of 1986 the report forecast a 275 pct rise in exports and a 35 pct rise in imports this year after rises of 325 pct and 65 pct respectively in 1986

The faster growth of imports compared with exports this year and last reflecting buoyant private consumption meant that the contribution of the foreign payments balance to GDP would shrink in both years

But given Switzerlands large external surplus there should be no concern if domestic demand grows faster than GDPWhich if only in a small way would contribute to improving international balances the OECD said

Real private consumption appeared to have been unusually buoyant last year with a 325 pct growth rate after several years of relative weakness it noted

In 1987 private consumption was expected to slow somewhat to a 225 pct growth rate but should still outstrip overall GDP it added

The outlook for investment in plant and machinery remained bright into 1987 and with capacity use at near record levels last year there was scope for rationalisation and modernisation in both the industry and service sectors it said

As a consequence growth in machinery and equipment investment is likely to decelerate only slightly this year after vigorous growth in 1986

But the report raised a questionmark over the prospects for tourism and the banking industry two major service sector earners of foreign exchange

The longterm appreciation of the Swiss Franc and the accelerating deregulation of foreign banking markets could lead to a loss of international market share for both it said

Particularly for the banks recent developments in international financial markets give rise to the question whether the Swiss financial system which has shown substantial flexibility in the past is adapting itself at the speed required To preserve its competitive position it said