According to UBS economists, weaker economic conditions in the Eurozone next year are dampening expectations for the Swiss economy. The growth forecast has been lowered.
UBS economists have revised the forecast for Swiss Gross Domestic Product (GDP) growth for the upcoming year to 1.3 percent from the previous 1.5 percent. The value for economic growth adjusted for sports events is now plus 1.5 percent instead of the previous 1.7 percent.
The main reason for these adjustments is cited as the bleak outlook for Europe, Switzerland’s main trading partner. A slower-than-expected acceleration of the economy in the Eurozone is also expected to delay the recovery in the Swiss industry, according to the assessment published on Monday.
Recovery – but weaker
Nevertheless, this still represents an improvement in economic conditions compared to the current year. For 2024, UBS expects GDP growth of around 1 percent. The forecast is based on the assumptions that consumer spending will remain stable thanks to the decrease in inflation and population growth, and that the industry, which is currently facing challenges in many areas, will benefit from an acceleration of the economy in the Eurozone. Uncertainties regarding domestic demand are moderate. However, a further increase in health insurance premiums and a rising unemployment rate could limit the potential. “Inflation, on the other hand, is expected to fall more sharply in 2025 than a few months ago. The inflation forecast is 1.1 percent for the current year and 0.7 percent for 2025.
Risks are present
There are still uncertainties regarding developments in the Eurozone. UBS expects a significant increase in real wages in the coming months. This should boost consumer spending and lead to increased capacity utilization and investment. This would also benefit the Swiss industry.
At present, it is not yet possible to determine from leading indicators and consumer confidence whether an acceleration is imminent. “The risk that the recovery in the Eurozone will not only be weaker but completely fail to materialize remains,” the report continues.