Economiesuisse expects economic growth to remain subdued
Published: Wednesday, Dec 4th 2024, 11:20
Updated At: Thursday, Dec 5th 2024, 00:59
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There is no acceleration in sight for the Swiss economy. In view of weak demand and the threat of trade disputes, Economiesuisse expects only modest growth in the Swiss economy. However, chief economist Rudolf Minsch does not expect a tariff battle instigated by Donald Trump.
The global economic situation will not improve significantly next year either, according to the umbrella organization of the Swiss economy: Economiesuisse predicts real gross domestic product (GDP) growth of 1.4 percent for 2025, according to a press release issued on Wednesday.
This means that the Swiss economy will remain slightly below its potential in 2025. Meanwhile, Economiesuisse has confirmed its previous forecast of 1.1% GDP growth for the year 2024.
Switzerland has potential growth of 1.5 to 1.6 percent, Minsch said in an interview with AWP Video: "We are now slightly below that. But because the global markets are so rough and the uncertainties are so great, 1.4 percent next year is not so bad."
Tariff escalation would be problematic
According to Economiesuisse, global markets are continuing to fragment into trading blocs and individual markets that are closing themselves off from one another. This will not change with the new US President Donald Trump taking office. Instead, further trade barriers would probably be erected, accompanied by countermeasures from other countries.
"It would be very problematic if it really came to a tariff escalation," said Minsch. In other words, if Donald Trump were to impose tariffs and the EU and other countries were to take countermeasures, leaving Switzerland somewhere between a hammer and an anvil.
At the moment, however, he does not expect an escalation. But tariffs would certainly be levied selectively, also to test what could be achieved. "But every tariff that is imposed is bad," said Minsch.
Swiss exports lose momentum
A small, open economy like Switzerland is particularly affected by such developments. "We are dependent on having good access to foreign markets," said Minsch. Demand is already weak, especially in Europe. Growth in exports is likely to fall from 1.7 percent this year to just 1.0 percent in 2025, Economiesuisse estimates.
Overall, however, the Swiss export industry is holding its own thanks to its focus on highly specialized niche products and innovative specialties. The broad diversification with a good industry mix and a global orientation helps in uncertain times.
"If demand is weak in the European automotive industry, for example, this is problematic for Switzerland, but does not threaten its existence because other markets at least partially compensate," explained Economiesuisse.
Solid domestic economy
The Swiss domestic economy, on the other hand, is growing solidly. It can rely on stable consumer demand. Private households are benefiting from real wage increases and low unemployment. Private consumption is likely to increase by 1.6 percent next year. Government consumption is also strong.
According to the association, many sectors that are mainly domestically oriented will continue to develop positively in 2025 after a good 2024: construction and in particular the finishing trade, wholesale, retail, healthcare, consulting and IT & telecoms are likely to grow overall. It will be more difficult for the printing and publishing industry.
Inflation falls faster than expected
Inflation is also low. The umbrella organization expects inflation to fall from 1.3 percent this year to an average of 0.8 percent next year. This means that inflation has fallen faster than expected. He therefore expects the Swiss National Bank (SNB) to cut interest rates by a quarter of a percentage point next week, said Minsch.
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