Swiss to avoid recession this year: Credit Suisse

Despite the negative impact of the strong franc, Switzerland should be able to avoid a recession this year “thanks to the robust situation of the global economy,” Credit Suisse said in a report issued on Tuesday.

Swiss to avoid recession this year: Credit Suisse
Photo: Credit Suisse

However, the bank in its Monitor Switzerland report for the first quarter of 2015 warned that strong growth momentum is not expected this year — “a year of stagnation” — or in 2016.

The report, from Claude Maurer, an economic researcher for Credit Suisse, predicts 0.8 percent growth in the Swiss economy, following two percent growth last year.

The franc has appreciated in value about ten percent since January when the Swiss National Bank abandoned its policy of pegging the Swiss currency to the euro at a rate of 1.20 francs per euro.

The stronger franc is hurting Swiss exporters by making their products more expensive to customers in the eurozone, Switzerland’s biggest market for goods and services.

But Credit Suisse said it considers a “recession to be unlikely”.

It said a “super cycle” fed by immigration, the real estate boom, low inflation and low interest rates” continues to underpin consumer spending.

The super cycle “continues to turn, even if more slowly than before”.

The bank said economic recovery in Europe in the US are offsetting the negative effects from the loss of competitiveness in the export sector.

Unemployment insurance, meanwhile is acting as an “automatic stabilizer” and an economic safety net, while the central bank stands ready to intervene if the Swiss franc appreciates in value too much, the report said.

However, the export sector will suffer for some time to come, impacting expected growth in 2016 of 1.2 percent, which is below-average growth for Switzerland.

For more on the report, check here.

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Sweden’s new right-wing govt slashes development aid

Sweden, one of the world's biggest international donors, is planning drastic aid cuts in the coming years, the country's new right-wing government said in its budget bill presented on Tuesday.

Sweden's new right-wing govt slashes development aid

Prime Minister Ulf Kristersson’s government said it planned to reduce the country’s international aid by 7.3 billion kronor ($673 million) in 2023, and by another 2.2 billion kronor in 2024.

That is around a 15-percent reduction from what had been planned by the previous left-wing government and means Sweden will abandon its foreign aid target of 1 percent of gross national income.

International aid for refugees will be capped at a maximum of eight percent of its aid, and will also be reduced.

According to the specialised site Donor Tracker, Sweden was the world’s eighth-biggest international aid donor in terms of absolute value last year, and the third-biggest in proportion to the size of its economy, donating 0.92 percent of its gross national income, behind Luxembourg and Norway.

The new government, which is backed for the first time by the anti-immigration Sweden Democrats, had announced in its government programme last month that it would be cutting foreign aid.

Since 1975, Stockholm has gone further than the UN’s recommendation of donating at least 0.7 percent of its wealth to development aid.

Despite its growth forecast being revised downwards — the economy is expected to shrink by 0.4 percent next year and grow by 2 percent in 2024 — the 2023 budget forecasts a surplus of 0.7 percent of gross domestic product.

It calls for an additional 40 billion kronor in spending, with rising envelopes for crime fighting and the building of new nuclear reactors, as well as a reduction in taxes on petrol and an increase in the defence budget.

The new government is a minority coalition made up of Kristersson’s conservative Moderates, the Christian Democrats and the Liberal party, backed in parliament by their key ally the Sweden Democrats to give them a majority.