(Updates with comment from government in fourth paragraph.)
Dec. 13 (Bloomberg) -- The Swiss government lowered its growth forecasts for this year and next, as companies cut spending to weather faltering export orders.
Swiss gross domestic product will rise 1.8 percent this year and 0.5 percent in 2012, the State Secretariat for Economic Affairs in Bern said in an e-mailed statement today. In September, it had forecast growth of 1.9 percent and 0.9 percent for this year and next, respectively. In 2013, the economy will expand 1.9 percent.
Switzerland’s economy is cooling as the franc’s strength is making exports more expensive just as the euro region edges toward a recession. The KOF leading indicator fell to the lowest in two years in November and Jona, Switzerland-based Holcim Ltd., the world’s second-largest cement maker, last month said the franc’s appreciation reduced third-quarter sales.
“Assuming that a further escalation of the debt crisis in the euro area can be averted, economic weakness in Switzerland should be limited and will be brief,” the government said. “However, at its current level the franc is still very highly valued and curbs Swiss companies’ international competitiveness.”
The franc was little changed after the statement and traded at 1.2356 versus the euro at 9:47 a.m. in Zurich. Against the dollar, it was at 93.74 centimes.
Exports will rise 3.4 percent this year and 0.4 percent in 2012, today’s report showed. Equipment spending will probably slump 2.5 percent in 2012, before rising 3 percent in 2013, while consumer spending is seen increasing 0.9 percent this year and 1.1 percent in 2012. That’s less than a previously projected 1.2 percent and 1.3 percent, respectively.
The Swiss National Bank will hold its next monetary policy assessment on Dec. 15, with some economists expecting policy makers to raise the limit of 1.20 francs per euro introduced in September to fight deflation risks and help exporters. The central bank will also release latest inflation forecasts.
“The minimum exchange rate of the SNB has stabilized the currency situation for companies and thus slightly improved,” the statement said. “Still, the franc remains on the current level, around 1.23 versus the euro, very highly valued.”
The government said it expects consumer prices to rise 0.3 percent on average this year before declining 0.3 percent in 2012. It had previously forecast prices would increase 0.3 percent next year. Prices will climb 0.3 percent in 2013, it said.
--Editors: Simone Meier, Jennifer M. Freedman
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