Federal economists lower inflation forecast with the same GDP expectation
Published: Tuesday, Mar 19th 2024, 10:40
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The federal government's economists have confirmed their forecasts for economic growth in the current year. At the same time, they assume that inflation in 2024 will be lower than previously expected.
The federal government's group of experts continues to forecast real gross domestic product (GDP) growth of 1.5% for 2024, as announced by the State Secretariat for Economic Affairs (SECO) on Tuesday. This means that its last forecast from December remains valid.
Excluding the effect of sporting events such as the Olympic Games and major football events, which distort Swiss GDP due to the licensing income of sports associations based in this country, the forecast also remains unchanged at +1.1 percent.
The rather below-average growth is therefore likely to continue. In 2025, however, things should improve somewhat: growth of 1.7 percent is predicted after adjusting for sporting events. A gradual recovery of the global economy should then contribute to this normalization, it is said. However, unadjusted GDP growth is forecast at a lower 1.3 percent.
With a view to the current year, the economists have adjusted their expectations for investments downwards, according to the press release. The declining utilization of industrial production capacities and increased financing costs are therefore weighing particularly heavily on investment momentum.
On the other hand, private consumption is expected to continue to have a supporting effect. The favorable situation on the labor market and the decline in inflation will contribute to this. Employment is therefore likely to grow slightly faster in 2024 than previously forecast. However, due to the moderate economic development, the experts confirm their previous forecast, according to which the unemployment rate should average 2.3% for the year.
Lower inflation expected
Federal economists are taking a more relaxed view of inflation. Specifically, inflation is now expected to reach 1.5% for 2024 as a whole, compared to 1.9% in December. The forecast for 2025 remains at 1.1%.
Economists consider the economic risks to be somewhat more balanced than three months ago. Geopolitical risks remain with the armed conflicts in the Middle East and Ukraine, they say. In addition, existing risks in connection with global debt, risks of corrections on the real estate and financial markets as well as balance sheet risks at financial institutions could intensify.
According to Seco, developments in Germany and China also pose risks for the international economy and therefore for Swiss foreign trade. On the other hand, it is also conceivable that the economic recovery will be more rapid than currently foreseeable. This would be the case, for example, if international inflation were to fall faster than expected, which would further strengthen the purchasing power of households and monetary policy could be eased more quickly. According to Seco, this would provide additional support for demand.
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