The Swiss economy is resilient to cyclical fluctuations.
In fact, growth should stabilise in the coming months.
In fact, the global economic situation is clouding over. The eurozone has officially entered recession as a result of the poor German figures, but the impact remains limited.
According to Eurostat, GDP fell by 0.1% between January and March, as well as in the fourth quarter of 2022.
What about Switzerland? Is there a risk that it too will be dragged down?
Activity is slowing down, but the risk does not seem to be envisaged.
So why has Switzerland remained untouched by the recession?
A secure and resilient business model
Our business model is known to be defensive, meaning that it is not affected by cyclical fluctuations. It is also positioned in high value-added products, and is therefore moderately affected by the slowdown in global demand.
The investment director of private bank Oddo BHF Switzerland notes the stable dynamism of pharmaceutical and chemical exports, which account for 50% of the total. The same can be said for the luxury goods sector, thanks to the gradual recovery in business in China.
Inflation remains lower than in the eurozone and the UK. This is preserving purchasing power and helping households to maintain their high level of private consumption.
Mathieu Grobéty, Executive Director of the Institute of Applied Economics (CREA) at the University of Lausanne, points out that private consumption is driving Swiss GDP growth, as households continue to consume strongly.
In fact, household consumption is one of the pillars of the country’s growth.
Swiss labour market resilient despite forecasts
The unemployment rate has not been at its lowest level since 2001. In fact, since May, the rate has fallen back below 2%, to 1.9%.
The outlook for the economy is unlikely to change much, since the key rate announced by the SNB is now 1.75%.
Despite this, analysts prefer to anticipate a further rise in the key rate in September.
The main effect of the rate rise will be to push up rents and, by extension, slow the decline in inflation.
According to Arthur Jurus, a fall in property prices is not to be expected, as the effect on residential investment will be more limited.
According to Mathieu Grobéty, household consumption could be considerably affected, through interest charges or rents, if interest rates remain high for long.
This possibility cannot be ruled out for the second half of 2024.
The KOF surveyed 18 economists, and according to them, inflation should be estimated at 1.6% next year, an increase of 0.3 points compared to the last survey conducted in March.
In addition, the research institute of the Swiss Federal Institute of Technology in Zurich has estimated inflation at 2.3% for 2023, compared with 2.4% previously.
A stable course for the Swiss economy
Nadia Gharbi, economist at Pictet Wealth Management, points out that inflation in Switzerland peaked in August 2022 at 3.5%.
The curve of price rises will gradually fall, although the process is likely to be long and the level higher than before the pandemic.
Experts believe that the main risk is a possible deterioration in the global economy.
As we said at the beginning of this article, the Swiss economy is not immune to cyclical fluctuations.
The SNB could face disaster if it were forced to raise interest rates more sharply to keep pace with other central banks.
However, a soft landing seems to be the chosen option.
For 2023 and 2024, Oddo BHF expects GDP growth of 0.8% and 1.4% respectively. Pictet Wealth Management is predicting 1% and 1.3%. Finally, the State Secretariat for Economic Affairs is forecasting 0.8% and 1.8%.
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