Swiss economy expects weak growth in 2023

The Confederation’s expert group for economic forecasts projects “significantly below-average growth” for the Swiss economy of 1.0 percent for 2023, as the Secretariat of State for Economic Affairs (Seco) announced on Tuesday. 2.0 percent growth is expected for this year.

As a result, the Swiss economy will develop weakly without falling into a serious recession. For its forecast, the group of experts assumes that there will be no energy shortages with production losses either in the current or next winter. However, the energy situation in Europe is likely to remain tense and gas and electricity prices are likely to be high. Moreover, high international inflation and monetary tightening are likely to slow down demand.

Therefore, the economic slowdown should also make itself felt in the labor market. This causes unemployment to increase slightly: The unemployment rate, which was 2.2 percent in 2022 on average, will be 2.3 percent in 2023.

High energy prices mean that relatively high inflation rates can be expected in Switzerland as well. The inflation rate, which was 2.9 percent in 2022, is likely to be 2.2 percent in 2023. Corresponding reduction effects on consumer spending can be expected; at the same time, rising interest rates are likely to reduce international investment activity.

Outlook for 2024

The forecast for 2024 was also published for the first time. After a tense winter in 2023/24, the energy situation in Europe will return to normal. At the same time, inflation rates should fall globally and the world economy should gradually gain momentum. Then a recovery would begin in Switzerland.

For 2024 as a whole, the group of experts predicts a slightly below-average economic growth of 1.6 percent and an inflation rate of 1.5 percent. The unemployment rate is likely to rise further, averaging 2.4 percent for the year.

Same forecast at Credit Suisse.

Credit Suisse has also released its economic forecast for 2023. It looks almost the same: Swiss gross domestic product will grow by 1.0 percent next year. While economists at the big bank previously assumed slightly higher growth (+2.5%) for 2022, they did not change their forecasts for the coming year.

Consumption will be supported by persistently low unemployment in 2023. CS also expects an unemployment rate of 2.2 percent. A key driver, however, remains the consistently high level of net migration of around 70,000 people next year, after around 75,000 this year. The outlook for the sector, which is likely to feel the effects of the recession in the euro area and lose momentum, is less positive.

According to economists at the big bank, inflation has already peaked in Germany and will drop again next year. They expect inflation in Switzerland to be 1.5 percent in 2023, after 2.9 percent this year.

Due to the different inflation expectations in the foreign exchange areas, the Swiss “interest rate bonus”, which returns with the return in interest rates, should also continue to exist. Switzerland has enjoyed lower interest rates than other countries for decades, but meanwhile, with the corona pandemic, the interest rate bonus has disappeared. (SDA/rae)