BAK slightly lowers GDP forecasts for 2024 and 2025
Published: Monday, Sep 30th 2024, 12:30
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The economic researchers at BAK Economics have become somewhat more pessimistic with regard to economic growth in the current and coming year. However, the general assessment of the situation has not changed.
Specifically, the BAK forecasters are now predicting real GDP growth (adjusted for sporting events) of 1.0% for 2024, after previously forecasting growth of 1.2%. For 2025, the BAK economists then expect more significant growth of 1.5% (previous forecast: +1.6%).
According to information released on Monday, the downward revision is justified by the fact that GDP growth in the second quarter (+0.5% compared to the previous quarter) was slightly below expectations. In addition, recently revised data would indicate that economic activity was somewhat weaker than originally reported.
However, the general assessment of the situation of the Swiss economy remains unchanged, according to the report. BAK continues to assume that GDP growth slowed to around 0.2 percent in the third quarter. The renewed decline in goods exports in July and August confirms that the improved performance in the second quarter was not the start of a strong recovery in the manufacturing sector.
Further interest rate cut expected
Although the experts from Basel expect industrial activity to pick up somewhat in the coming quarters, the improvement in demand is likely to remain unspectacular. Many European and Chinese trading partners are struggling with ongoing structural problems, they say. In addition, the positive effects of the loose monetary policy will take time to filter through to the rest of the economy. The recent appreciation of the Swiss franc also poses certain risks.
However, there are also important elements that will support the economy, BAK emphasizes. For example, inflation was only 1.1 percent in August and is expected to average 0.7 percent in 2025. The sharp rise in prices in important categories such as rent and electricity is likely to slow or reverse. As inflationary pressure is low but upward pressure on the Swiss franc is high, BAK economists expect a further interest rate cut of 0.25 basis points to 0.75% in December.
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