Swiss Economic growth update: inflation forecast subdued but optimistic in 2023

On 20 September 2022, federal forecasters downgraded expectations for Swiss GDP growth to 2.0% in 2022 and 1.1% in 2023 due to the current global economic and political climate.

The reduced growth forecast for 2023, is primarily due to slowing global demand for Swiss exports and the cooling effect of inflation on domestic demand.  Inflation is however low by international standards, partly due to the ever strengthening Swiss Franc. Inflation in Switzerland is now expected to be 3.0% in 2022 dropping to 2.3% in 2023.

Strong employment should also support a continuing healthy consumer sector which has been buoyed in 2022 especially in travel and leisure. However, the forecast assumes there will not be a severe energy crisis resulting in major industrial disruption.

The Swiss national bank has just raised the reference interest rate out of negative territory to 0.5%. This is seen as generally good for economic stability and investment. For the first time since 2012, the federal government has increased personal allowances allowed against income tax to account for wage and price inflation.

Especially this year, it is not possible to forecast the economy with the “usual” confidence -primarily because of the uncertainty of the war in Ukraine. However today’s picture, assuming the expected trajectory in trends across the board, still looks positive for Switzerland.

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