Economic experts reduce Swiss GDP growth expectations due to weak European performance and strong franc, projecting 0.9% growth for 2024 and 1.4% for 2025.
"The Swiss economy continues to be held back by the subdued development in Europe, particularly in Germany and France"
Switzerland's leading economic institutions have significantly lowered their growth forecasts for the coming years, reflecting mounting challenges in the global economic landscape. The KOF Swiss Economic Institute has revised its 2024 GDP growth projection down to 0.9% from the previous 1.1%, while the forecast for 2025 has been adjusted to 1.4% from 1.6%. Similarly, the Swiss government's expert group has aligned with these conservative estimates, reducing their 2024 forecast to 0.9% from 1.2%.
The downward revision primarily stems from external factors, notably the weak economic performance in neighboring European countries, particularly Germany and France. The strong Swiss franc continues to pose challenges for export-oriented sectors, impacting international competitiveness. The already subdued international economy showed further deterioration in the fourth quarter, with weak demand expected to persist until mid-2024.
Despite external pressures, Switzerland's domestic economy shows resilience, supported by strong consumption patterns. The inflation outlook has improved significantly, with SECO projecting an annual inflation rate of just 0.3% for 2025. However, the labor market faces some challenges, with the unemployment rate expected to rise slightly to 2.7% in the coming year. Consumer spending by private households is anticipated to benefit from the lower inflation environment.
Looking ahead, economists anticipate a gradual improvement in economic demand from mid-2024 onwards. The Swiss National Bank is expected to implement further monetary policy adjustments, with predictions of an additional interest rate cut to 0.25% in March 2025. This follows last week's 50 basis point reduction in the key interest rate. The combination of slower wage growth and lower reference interest rates is expected to help reduce inflationary pressure on domestic services and rents. For 2026, both KOF and federal economists maintain a more optimistic outlook with projected growth of 1.7%.