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UPDATE 1-Swiss government warns stronger franc will weigh on economy
February 5, 2015 / 9:10 AM / 3 years ago

UPDATE 1-Swiss government warns stronger franc will weigh on economy

* Swiss government warns stronger franc will hit economy

* Will publish new forecasts on March 19 (Adds detail, economist comment)

ZURICH, Feb 5 (Reuters) - The Swiss government warned on Thursday that a soaring franc meant economic growth would be weaker than previously expected and it was still too difficult to assess how severe the slowdown would be.

The Swiss National Bank abandoned its 1.20-per-euro cap on the Swiss franc on Jan. 15 and companies across export-reliant Switzerland warned of a plunge in profits after four years of being protected against the effects of a strong currency.

Some economists, including the KOF Swiss Economic Institute, are now predicting a recession for 2015.

“If the Swiss franc remains at a significantly higher level over an extended period, economic development must be expected to be weaker than had been assumed in the previous forecasts,” the State Secretariat for Economics (SECO) said in a statement.

SECO said it would issue new economic forecasts on March 19.

Before the cap ended it had forecast growth at 2.1 percent this year and 2.4 percent next year, with a slight rise in unemployment.

“SECO will probably revise down their forecasts in March,” Credit Suisse economist Maxime Botteron said.

“They are much higher than the consensus at the moment but they will have an advantage because they will have a bit longer and maybe by then we’ll have a better idea where the exchange rate will stabilise,” he said.

Berne has discussed ways to protect the Swiss economy from the fallout of a far stronger franc, including debating longer shop opening hours to help the tourist industry.

In a separate statement, SECO said Swiss consumer sentiment index improved to -6 points in the first quarter from -11 points in the fourth quarter of 2014. More than three quarters of the survey was done before the cap ended, it said. (Reporting by Maria Sheahan and Joshua Franklin; Editing by Louise Ireland)

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