ZURICH, June 20 (Reuters) - The Swiss government cut its outlook for 2017 economic growth in its latest forecast on Tuesday, adding it expected inflation to remain subdued.
The State Secretariat for Economic Affairs (SECO) said it expected economic growth of 1.4 percent in 2017, below the forecast of 1.6 percent it gave in March.
“The slight downward adjustment compared with the previous forecast takes into account the more sluggish growth seen in the first quarter. Economic growth is expected to accelerate substantially throughout the year due to favourable economic conditions at an international level and thanks to the continued strong sentiment indicators,” SECO said.
SECO kept its forecast for gross domestic product to expand 1.9 percent in 2018.
Inflation was forecast to be 0.5 percent in 2017 and 0.2 percent in 2018, compared to its earlier view of 0.5 percent and 0.3 percent. Anticipated rent reductions should weigh on 2018 price increases, it said.
The Swiss National Bank last week said it expected Swiss economic growth of around 1.5 percent this year, with inflation rising to 1.0 percent by 2019 from 0.3 percent this year.
“There still remains a significant amount of political risk in connection with the USA’s stance on trade and fiscal policy and the implementation of the Brexit referendum. If these risks materialise, they would, however, not be likely to have an impact on Switzerland until the second half of the forecast period,” SECO said.
It also cited “additional uncertainty” in Italy ahead of a general election.
“After the failure of the electoral reform, political instability is a possible threat. The associated risks must not be underestimated given the high level of government debt borne by this key member of the euro and the ongoing fragility of its banking sector,” it said.
“The Swiss franc could end up being pushed up sharply if the European debt crisis were to flare up again or the situation in the banking sector worsen significantly, with considerable consequences for the Swiss economy.” (Reporting by)