February 28, 2019 / 7:43 AM / 3 months ago

Swiss more gloomy about 2019 even as Q4 produced growth

ZURICH, Feb 28 (Reuters) - The Swiss economy returned to moderate growth during the fourth quarter of 2018, but the government on Thursday said it is more gloomy about prospects for 2019, citing Brexit, slowing growth in Europe and global trade tensions.

A resurgence in manufacturing helped Swiss GDP increase by 0.2 percent in the last three months of 2018 from the previous quarter, reversing a 0.3 percent decline in output during July-September, according to figures published by the State Secretariat for Economic Affairs (SECO).

The fourth quarter figure meant Swiss economic output increased by 2.5 percent during 2018 as a whole, above the country's long-term average of 1.7 percent.

But despite the improvement - fueled particularly by the chemical and pharmaceutical sector - the Swiss government is more downbeat about prospects for this year, and could revise downwards its forecast for 2019 growth.

"The year as a whole was very positive, and was one of the strongest years of growth after the financial crisis," SECO economist Ronald Indergand told Reuters in an interview.

"But this was mainly due to the momentum at the end of 2017 and the start of 2018. The second half of the year was disappointing, there's been a sharp slowdown of growth in Switzerland, and Germany, Italy and the rest of Europe."

Domestic demand in Switzerland has been weak due because of tepid wage rises, while investments by companies have also become subdued.

Since December, when the Swiss government cut its 2019 growth forecast to 1.5 percent, the situation has worsened, Indergand said.

"It is quite possible we will have to revise our forecasts downwards further, there is certainly no room for an upward revision," he said.

"We are at the end of a positive economic cycle in Europe, and don't expect an immediate pick up. A cooling down is happening also in Asia and even the U.S. seems to be slowing down. Trade tensions and Brexit are most likely playing a role."

Political risks in Italy could also hit Swiss growth, Indergand said, and the situation could worsen if the recession underway there intensifies.

Although Britain's chaotic departure from the European Union will not affect Switzerland directly, a no-deal Brexit that harmed economic development in Europe would hurt the Swiss economy.

"Switzerland is a small and very open economy, so we are heavily dependent on what happens in the rest of the world, particularly Europe."

The Swiss government is due to give its next economic forecast for 2019 and 2020 on March 14. (Reporting by John Revill; Editing by Richard Borsuk)

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