Predicting Economy's Downward Trend in Switzerland by 2025
Whether you're a business owner or an investor, it's essential to keep a close eye on the economic forecasts for Switzerland and its primary trading partner, Germany. Here's a no-holds-barred rundown of the current situation and the factors shaping the future.
The Ministry has recently revised Switzerland's annual growth forecast from a measly 0.9 percent to an even scrapier 0.2 percent in the third quarter. They pointed towards the lingering European economic recovery and uncertainties around economic and trade policies as key contributors. However, there's a silver lining: they expect the Swiss economy to get a boost from the decline in mortgage rates and a sharper-than-expected drop in inflation.
Germany, Switzerland's largest trading partner, is showing signs of weakness, with the situation for industry remaining tense. The Ministry's group of experts expects this to drag down export-oriented Swiss industrial companies, particularly considering the drop in orders from Germany.
In the grand scheme of things, the Ministry expects a GDP growth of 1.7 percent in 2026. That's a bit better than the current dismal state, but it's still no cause for celebration.
Now, let's talk inflation. The Ministry has revised its inflation forecast down to 1.1 percent for 2024, from the previously projected 1.2 percent. As for 2025, they're sticking with the 0.3 percent forecast.
As for wage growth, the average nominal wage increases are expected to be 1.4 percent, translating to a puny 0.7 percent real wage growth, according to UBS. But, there's a bit of a catch: rising health insurance costs could potentially offset these gains.
On the international front, the strong Swiss franc is good news for import costs, but it puts a dent in export competitiveness. Global tariffs and potential policy missteps during monetary normalization are other risks looming on the horizon.
To summarize, the European recovery is taking its sweet time, and normalization of international growth might not happen before 2026. But, you know what they say: every cloud has a silver lining. Let's hope for a recovery in the construction sector and continue to smile through the hard times, things could always get worse, Right?
[1] "Swiss economic growth slows in Q3 on weaker orders from Germany" - https://www.reuters.com/world/europe/swiss-gdp-grows-slower-q3-weaker-orders-germany-2021-11-18/[2] "Prospects for 2025: An uncertain outlook" - https://www.ubs.com/global/en/research/ch-fs-economic-research/prospects-for-2025.html[3] "Japanese economic outlook: anxiety and hope" - https://www.ft.com/content/cb577669-4a5e-47b2-8ca4-fa2f671a1a1d[4] "The Global Economic Outlook" - https://www.vanguard.com/content/globalmacro[5] "Prospects for 2025: An uncertain outlook" - https://www.ubs.com/global/en/research/ch-fs-economic-research/prospects-for-2025.html
- The slowdown in Swiss economic growth, as indicated by the Ministry's revised annual growth forecast from 0.9% to 0.2%, might be due in part to a falloff in orders from Germany, their largest trading partner.
- Despite the expected decline in the Swiss economy in 2024 and 2025, with an inflation forecast of 1.1% and 0.3% respectively, there's a glimmer of hope as the Swiss economy may benefit from the decline in mortgage rates and a sharper-than-anticipated drop in inflation.
- In the quarterly financial reports of various businesses, it's crucial to watch the normalization of international growth, considering the uncertainties surrounding global tariffs and monetary policy adjustments that could potentially impact Switzerland's business environment.
- As the European recovery progresses and the world economy adapts, the Swiss finance and export-oriented industries may experience fluctuations, which investors and business owners should keep a close eye on during the upcoming quarters.
