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Swiss economy has bottomed out:top economist -paper

Published 08/16/2009, 08:11 AM
Updated 08/16/2009, 08:15 AM

* Top economist says economy has bottomed out

* Signs of positive growth expected during first-half 2010

* Unemployment to peak winter 2010/11

By Jonathan Lynn

GENEVA, Aug 16 (Reuters) - Switzerland's economy has bottomed out in the current downturn, but the peak in unemployment will not be reached until winter 2010/11, the government's top economist was quoted as saying on Sunday.

Aymo Brunetti, head of economic policy in the State Secretariat for Economic Affairs (SECO), said economic developments in the coming months would be less bad than previously, although forecasts remained difficult

"In the first half of 2010 at the latest would should again record mildly positive growth rates," he said in an interview with the weekly newspaper Sonntag.

He said the government was sticking to its forecast that the economy would contract by 0.4 percent in 2010 after falling 2.7 percent this year.

Brunetti said he did not expect another sharp reversal in growth but the recovery faced several hurdles:

-- current signs of recovery largely reflected the rebuilding of inventories after stocks were run down;

-- the effects of worldwide stimulus measures would increasingly fade away by the end of the year;

-- household incomes would not recover immediately.

"However, overall I assume that we have now reached the bottom," he said.

JOBS DOWNTURN "JUST STARTING"

The main risk to a recovery of Switzerland's export-orientated economy was the development of the global economy, he said.

The rising risk of inflation in the medium term in some countries and the possibility of a renewed shock to financial market, especially debt, also posed dangers, he said.

Switzerland's neighbours and major trading partners Germany and France have both reported returns to growth in the second quarter.

But Brunetti said Germany was in a worse position than Switzerland. It faced a fall in gross domestic product this year overall of up to 6 percent and was therefore starting from a lower level.

However, with jobs typically lagging the economy, the Swiss labour market was just starting its real downturn. Brunetti said the latest unemployment data pointed to a big increase in autumn and winter.

Jobless numbers, already at a five-year high, were likely to peak in the winter of 2010/11, and employment would not regain its pre-crisis level until the end of 2011, he said.

On Saturday the top official in the Swiss Employers Confederation, Thomas Daum, was quoted as saying the unemployment rate would rise over 5 percent before the crisis ended. He gave no timeframe.

Incoming orders in the engineering, electrical and metal industry -- Switzerland's biggest sector in terms of both employment and exports -- probably fell 25 percent in the second quarter after dropping 44 percent in the first, Johann Schneider-Ammann, president of the industry association Swissmem, told the newspaper in an interview.

He too said the economy appeared to have bottomed out but there were not yet any signs of sustained recovery. (Editing by Jon Loades-Carter)

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