RTTNews - Tuesday, the Zurich-based think-tank KOF lowered its Swiss gross domestic product forecasts.

The KOF now sees a contraction of 3.3% in the Swiss GDP for 2009, worse than its March's forecast of a 2.4% shrinkage. For 2010, the research institute expects a GDP decline of 0.6%, while it had predicted a 0.3% contraction in March. The economy is expected to emerge out of recession only towards the end of 2010.

The recession, which has been rather mild by international standards owing to its relatively late effect on private consumption, will last longer in Switzerland than in its neighboring countries, the KOF said.

Regarding exports, the KOF expects a recovery in the fourth quarter given the prospects of a slight economic revival in Switzerland's important export destinations. However, the institute forecast exports decline of 13.1% for 2009. A moderate growth of 2.1% is seen for next year.

That said, services exports will remain weak for a longer period, the institute said. For one, the latest tourism boom has come to an end, and, secondly, Switzerland as a financial centre has been particularly hard hit by the current crisis.

The revival of exports would come too late and too weak to prevent a surge in unemployment, the KOF said, predicting more job cuts. Unemployment is expected to peak at about 6% by the end of 2010.

A sharp salary decline is also predicted, which in turn is expected to result in a sustained weakening in private consumption in the coming year. This will remove an important pillar of Switzerland's domestic economy, the think-tank said.

On the other hand, the institute is hopeful that a third fiscal stimulus package aimed to lessen the drop in private consumption may arrest the rise in unemployment to some extent.

The KOF is of the view that the risk of a home-made deflation in the Swiss economy is negligible. Though the current liquidity surplus is likely to feed inflation, the predicted recovery is far too weak to exert demand-induced pressure on prices, the institute said.

Earlier on Tuesday, a survey among the small and medium-sized companies by the State Secretariat for Economic Affairs found that corporate finance in the country remained hardly affected by the economic slowdown. The survey also found that these firms were rather optimistic about future. Only 12% were worried about a decline in sales, while 40% are looking forward to stability. Thirty-five percent expected growth and 13% did not answer.

Further, the SMEs' perceived a lack of opportunity as the main obstacle to growth than a lack of funding. The survey was carried out among 1,772 companies.

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