Switzerland’s economy will fall short of 1 percent growth this year, the government forecast Thursday, the weakest performance in eight years at least partly the result of a lack of global sporting events.
Sluggish growth in the services sector was another factor in the State Secretariat for Economic Affairs (SECO) downgrade of its full-year growth forecast to 0.9 percent from June’s forecast of 1.4 percent.
It would be the lowest growth figure since the economy shrank 2.2 percent in 2009 during the global financial crisis.
Events like the Olympics or major international soccer tournaments — absent from this year’s calendar — fill the coffers of Swiss-based organizations such as the International Olympic Committee or FIFA and boost the country’s GDP accordingly.
The lower value added from sporting events — and the base effect from global galas in 2016 — already triggered a downward revision of 0.2 percentage points for first-quarter growth.
More than half of Thursday’s reduced annual forecast was attributed to a revision of SECO’s figures for the end of 2016 and start of 2017, which will reduce overall GDP growth for 2017 as a whole.
The downgrade at least in part reflected lower income for sporting bodies in the final quarter of 2016 after picking up revenue such as from TV licenses in the first half for events the Euro 2016 soccer tournament and the Rio Olympics.
Overall, meanwhile, the Swiss economy is only gradually returning to a dynamic growth path, SECO said.
Manufacturing and the hotel and catering industry continued to recover from the slump of the last few years, but sluggish growth in most other service sectors offset this, it said.
The Swiss National Bank and Credit Suisse had already cut their 2017 forecasts.
SECO said it expected GDP growth to accelerate to 2 percent next year, citing stronger global growth and a pick-up in Swiss exports, aided by recent weakening of the Swiss franc.
In a bright spot, exports increased 3.9 percent in August, with the country’s embattled watch sector also logging a 4.2 percent increase.
“There is no reason for alarm,” said SECO’s Indergand. “We expect growth to accelerate in the third quarter and to be closer to 0.5 or 0.6 percent as opposed to the 0.3 percent in the second quarter.”
No figure has been calculated for how much a lack of sports-related revenue will reduce economic growth this year, but SECO expected a similar level to 2015, when it cut GDP growth by 0.2 percentage points. Sporting events added 0.3 percentage points to GDP in 2016.
“These sporting bodies are important contributors to Swiss GDP, especially in years which have big events like the Olympics or the soccer world championships,” said SECO economist Ronald Indergand.
“But these events are cyclical and we don’t want to put too much emphasis on them from an economic point of view because they don’t employ tens of thousands of people in Switzerland and don’t affect the general direction of the economy.”
Report courtesy Reuters