Switzerland cuts growth forecast, more upbeat on inflation

SWITZERLAND cut its growth forecast for next year again, but sees inflation slowing.

The State Secretariat for Economic Affairs (Seco), which is in charge of drawing up economic forecasts for the government, predicts that gross domestic product will expand just 1 per cent in 2023. That’s half this year’s pace and lower than the September prediction of 1.1 per cent. At the same time, it expects consumer prices to rise by 2.2 per cent next year – less than previously estimated.

In 2024, the Swiss economy will probably rebound and expand 1.6 per cent, while inflation will temper to 1.5 per cent – below the Swiss National Bank’s (SNB) 2 per cent ceiling.

“The likelihood of facing an energy shortage this winter has diminished recently,” Seco said in a statement on Tuesday (Dec 13). “However, such a risk for the 2023/24 winter is now emerging.”

With the fears of energy shortages during the coming months largely mitigated, Switzerland is expected to dodge a recession – economists predict only one quarter of contraction next year. Consumer price growth peaked at 3.5 per cent in August – a three-decade high – and has since decreased. This leaves Switzerland with the lowest rate in the OECD.

Economists at Credit Suisse see Swiss inflation slow more rapidly and expect it come in under 2 per cent in the second quarter of next year. Readings – published just after Seco – predict a full-year rate of 1.5 per cent for 2023. That’s primarily thanks to swift SNB action, according to Claude Maurer, chief economist for Switzerland.

“Second-round effects won’t gain a foothold next year” after already failing to do so in 2022, he told reporters in Zurich. “If firefighters come early enough, they need less water.”

The estimates come just two days before the central bank publishes own predictions, which could allow it to forego another 75 basis-point hike and instead opt for a smaller move. The SNB will announce its rate decision at 9.30 am on Thursday. BLOOMBERG