The Swiss economy, which is in a recession, will continue to slow down into the middle of 2009, but avoid the worst of the global economic downturn, according to Banque Cantonale de Genève in its annual economic forecast.

Acknowledging that Switzerland is in recession, the report predicted that the Swiss slowdown would span three quarters – from the final quarter of 2008 through to the first half of 2009. As a result, the economy would be see no growth next year. 2010 could see a moderate recovery.

The bank forecast that the Swiss would not have to undergo a sharp contraction of credit although the country remained dependent on the

US economic climate.

“The absorption of the essentially American mountain of debts by the rest of the world will also have its impact on the Swiss economy – which should not grow more than one or two per cent for a number of years,” the report said.

The report stressed that the Swiss economy is well diversified and not solely dependent on the banking sector. However the report did acknowledge that the country’s dependence on private banking could force alternate outcomes.

“At the end of 2008 the Genevan banking sector is little affected by the financial crisis. However, in case of the prolongation of the stock-market slump, it would be vulnerable, through wealth management activities,” the report added.