SWISS ECONOMY IN EXCELLENT CONDITION, OECD SAYS
Switzerland's 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 pick-up in
inflation this year, but said these gave no cause for concern.
    The study forecast a decline in Gross Domestic Product
growth to 1.75 pct this year from an estimated two pct in 1986
and a small rise in consumer price inflation to 1.25 pct after
last year's sharp fall to 0.75 pct from 3.6 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 24-industrial
nation OECD area.
    Assuming an average exchange rate of 1.71 Swiss francs to
the dollar this year, against 1.69 in the second half of 1986,
the report forecast a 2.75 pct rise in exports and a 3.5 pct
rise in imports this year after rises of 3.25 pct and 6.5 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 Switzerland's large external surplus, there
should be no concern if domestic demand grows faster than
GDP...Which, 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 3.25 pct growth rate, after several
years of relative weakness, it noted.
    In 1987 private consumption was expected to slow somewhat
to a 2.25 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 long-term 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.
 REUTER
