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Marked economic slowdown on horizon in Switzerland

© Evgeniy Lapshin |

On 20 September 2022, government forecasters announced downgraded expectations for GDP growth in Switzerland.

A group of experts focused on predicting business cycles downgraded expected GDP growth to 2.0% in 2022 and to 1.1% in 2023.

After a positive first half of the year the Swiss economy now faces a deteriorating outlook, said the group. A tense energy situation and sharp price increases are weighing on economic prospects across Europe.

As expected, the Swiss economy continued to recover during the second quarter, if somewhat less vigorously than expected. GDP growth was driven by the service sector. Consumer spending in particular picked up substantially in leisure, hospitality and travel since the lifting of public health restrictions.

However, the current economic indicators present a mixed picture. Favourable employment data should continue to prop up consumer spending, given that inflation in Switzerland remains modest by international standards (estimated at 3% for 2022). Parts of the domestic economy should therefore continue to recover. At the same time, a challenging international environment is likely to exert increasing pressure on the more cyclical segments of export-oriented industries.

Expectations for global demand have been lowered significantly, particularly in the euro zone, the United States and China, Switzerland’s key trading partners, said the group.

For 2023, the growth downgrade is largely down to the impact of slowing global demand on Switzerland’s export sectors. On top of this will be the cooling effects of inflation on domestic demand. Inflation is now forecast at 3.0% for 2022 and 2.3% in 2023.

The forecast assumes there will not be a severe energy crisis with widespread production stoppages. The biggest risk to the Swiss economy is serious gas or electricity shortages in Europe with large-scale production stoppages. Pandemic-related setbacks, which cannot be ruled out, are another risk. For example if new virus variants were to emerge. And if China’s economy were to be further weakened by strict containment measures the effects would be felt globally.

It is also possible, however, that the economy will fare better than projected. This could be the case if the energy situation turns out to be milder than expected or eases more quickly, said the group.

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