Raiffeisen Switzerland's economists predict that economic growth in Switzerland will improve modestly in the coming years.
They anticipate a GDP increase of 1.1 percent in 2024, followed by a further rise to 1.3 percent in 2025. Despite this positive outlook, the Swiss economy is expected to continue falling short of its potential due to ongoing challenges.
The report highlights the resilience of the chemical and pharmaceutical sectors, which are expected to drive growth, along with an increase in consumer spending supported by strong employment growth in the services sector and rising real wages.
Inflation is projected to decrease significantly to 0.5 percent by 2025, indicating a potential stabilization in the economic environment. However, uncertainties related to international trade policies and the economic performance of neighboring countries could impact Switzerland's economic trajectory.
The economists emphasize that while there are signs of improvement, the overall economic landscape remains fragile. The future of U.S. trade policy under President Donald Trump is seen as a critical factor influencing global economic sentiment. The lack of clarity regarding U.S. trade policies creates substantial uncertainty that could dampen business confidence worldwide, especially in Europe. Political and economic challenges in major EU countries, particularly Germany and France, further contribute to the uncertain environment. The current political climate in Germany is already affecting Swiss companies, especially those in the automotive supply chain and industrial sectors. The economic influence of France also plays a role in shaping the Euro-to-Swiss-Franc exchange rate, which is expected to remain around 0.92 in the coming year.
In terms of interest rates, Raiffeisen expects further declines, with a reduction of 25 basis points anticipated in the Swiss National Bank's upcoming decision, bringing rates down to 0.75 percent. The trend towards lower interest rates is expected to continue, potentially approaching zero or even negative rates by 2026. Despite the decline in interest rates, the supply of funding for corporate investments remains robust, although the cost of financing has increased. The real estate market is also expected to be affected by falling interest rates, potentially reigniting interest from institutional investors. However, a return to the pre-2020 boom years in real estate is not expected.
While some sectors are experiencing a decline in demand for workers, the services sector continues to show strong growth. The outlook for the chemical and pharmaceutical sectors remains optimistic, as they are expected to contribute significantly to Switzerland's economic growth. The combination of strong employment figures and rising real wages is likely to boost consumer confidence and support economic activity in the coming years.
As Switzerland navigates these economic dynamics, the interplay between domestic growth, international trade policies, and sectoral performance will be critical in shaping the country's economic landscape. Ongoing uncertainties, particularly those stemming from geopolitical factors, will require careful monitoring as businesses and policymakers adapt to the evolving environment.