Swiss government confirms growth outlook, trims inflation forecast

THE Swiss government maintained its growth forecasts for this year and next on Thursday (Jun 15), noting a strong start to 2023 when energy prices continued to fall, but highlighting continued international inflationary pressures and economic risks.

Switzerland’s economic growth is expected to slow to 1.1 per cent this year – well below its long-term average and down from 2.0 per cent in 2022 – before picking up to 1.5 per cent next year, the State Secretariat for Economic Affairs (Seco) said.

“The Swiss economy started the year vigorously, and energy prices continue to fall,” it said, citing increases in domestic demand, private consumption and exports.

“However, current indicators are giving mixed signals, and a general weakening of the Swiss economy is expected in the Second quarter,” Seco added.

UBS economist Alessandro Bee said that while government forecasts were broadly in line with his outlook, Seco was more optimistic about next year, with UBS forecasting 1.3 per cent growth in 2024.

“We see recession risk for the US economy at the end of this year or the beginning of next year, which will slow Swiss exports overall, whereas the Seco is more upbeat for US growth and therefore for Swiss exports as well,” Bee said.

Current growth forecasts remain below the average 1.8 per cent expansion Switzerland recorded between 2012 and the pre-pandemic year 2019.

The growth numbers, adjusted for the impact of sporting events, were in line with government’s March forecast, but its experts lowered their 2023 inflation forecast to 2.3 per cent this year from an earlier forecast for 2.4 per cent, and last year’s 2.8 per cent rate.

For 2024, Seco said it expected Swiss inflation to decline further to 1.5 per cent.

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Separately, Switzerland’s KOF economic institute notched up its 2023 growth forecast to 1.2 per cent from 1.1 per cent while keeping next year’s outlook unchanged at 1.7 per cent, and highlighted the strength of the labour market despite sluggish overall activity.

While Swiss inflation remains low by international standards, it remains above the central bank’s 0-2 per cent target range, fuelling concerns inflationary expectations could become entrenched.

The Swiss National Bank is due to update its economic forecasts after its quarterly monetary policy review on Jun 22. REUTERS