SWISS ECONOMY IN EXCELLENT CONDITION, OECD SAYS

  Switzerland's economy, combining low
  unemployment, financial stability and a large external payments
  surplus, is in excellent condition and faces a satisfactory
  future, the Organisation for Economic Cooperation and
  Development, OECD, said.
      This reflected the success of stable and relatively tight
  fiscal and monetary policies followed by the government, it
  said.
      The OECD, in its annual report on Switzerland, picked out
  some signs of a slowdown in activity and a slight pick-up in
  inflation this year, but said these gave no cause for concern.
      The study forecast a decline in Gross Domestic Product
  growth to 1.75 pct this year from an estimated two pct in 1986
  and a small rise in consumer price inflation to 1.25 pct after
  last year's sharp fall to 0.75 pct from 3.6 pct in 1985.
      But it said job creation should continue to absorb a modest
  increase in the workforce, leaving the unemployment rate
  unchanged at around one pct, the lowest in the 24-industrial
  nation OECD area.
      Assuming an average exchange rate of 1.71 Swiss francs to
  the dollar this year, against 1.69 in the second half of 1986,
  the report forecast a 2.75 pct rise in exports and a 3.5 pct
  rise in imports this year after rises of 3.25 pct and 6.5 pct
  respectively in 1986.
      The faster growth of imports compared with exports this
  year and last, reflecting buoyant private consumption, meant
  that the contribution of the foreign payments balance to GDP
  would shrink in both years.
      But "given Switzerland's large external surplus, there
  should be no concern if domestic demand grows faster than
  GDP...Which, if only in a small way, would contribute to
  improving international balances," the OECD said.
      Real private consumption appeared to have been unusually
  buoyant last year, with a 3.25 pct growth rate, after several
  years of relative weakness, it noted.
      In 1987 private consumption was expected to slow somewhat
  to a 2.25 pct growth rate, but should still outstrip overall
  GDP, it added.
      The outlook for investment in plant and machinery remained
  bright into 1987, and with capacity use at near record levels
  last year there was scope for rationalisation and modernisation
  in both the industry and service sectors, it said.
      As a consequence, growth in machinery and equipment
  investment is likely to decelerate only slightly this year
  after vigorous growth in 1986.
      But the report raised a questionmark over the prospects for
  tourism and the banking industry, two major service sector
  earners of foreign exchange.
      The long-term appreciation of the Swiss Franc, and the
  accelerating deregulation of foreign banking markets, could
  lead to a loss of international market share for both, it said.
      Particularly for the banks, "recent developments in
  international financial markets give rise to the question
  whether the Swiss financial system, which has shown substantial
  flexibility in the past, is adapting itself at the speed
  required ... To preserve its competitive position," it said.
  

