UBS expects Swiss economy to pick up in 2025
Published: Tuesday, May 14th 2024, 11:40
Updated At: Tuesday, May 14th 2024, 11:40
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The Swiss economy has only grown moderately so far this year. Industry in particular is being held back by the weak development in the eurozone. However, UBS experts expect somewhat more dynamic growth from 2025 onwards. Inflation should nevertheless continue to fall.
In the study on economic development in Switzerland published on Tuesday, the big bank maintains its previous forecast for GDP growth in 2024 of 1.3%. The weakness in industry is now quite pronounced, but solid consumption is providing support, it says. Overall, there are many uncertainties in the world and geopolitical risks are increasing, added Chief Economist Switzerland Daniel Kalt.
Next year, a brightening of the European economy could then also help Swiss industry and thus the entire domestic economy to develop more dynamically. GDP growth is then expected to be slightly higher at 1.5% in 2025.
The difference between the two years is somewhat more pronounced when looking at GDP adjusted for major sporting events. As is well known, the Olympic Games and major football events distort Swiss GDP due to the licensing income received by the sports associations based in Switzerland. The GDP forecast for 2024 is then 1.0 percent and that for 2025 is 1.6 percent.
Inflation forecast lowered
UBS is very confident about inflation. Inflation in the first four months was well below the previous year's level. As there are also hardly any visible second-round effects, average inflation in 2024 is likely to be just 1.2 percent. Inflation should even fall to 1.0% in 2025.
This development has already enabled the Swiss National Bank (SNB) to cut interest rates for the first time. However, UBS economists anticipate two further steps in June and September - these are likely to be 25 basis points each and would then push the key interest rate down to 1.0%.
However, UBS is not entirely sure about this. "If the other central banks wait even longer than currently thought, it is questionable whether the SNB will then push ahead on its own," Kalt qualified. After all, a franc that is too weak could fuel imported inflation again.
Companies face many challenges
In addition to the general economic outlook, UBS has also looked at the resilience of Swiss companies. Companies are facing numerous challenges, as UBS concludes from a survey. 2,500 companies took part, mainly (79%) from the service sector and mainly (61%) small companies with fewer than 10 employees.
Half of the companies stated that the topic of resilience had become more important to them - especially for the gastronomy sector, which has been hit hard recently. The number and intensity of the upheavals that companies are facing is increasing.
Around 90 percent see themselves as being equipped to deal with minor shocks, but half of them see major upheavals as a major burden or even a threat to their continued existence. Large companies see themselves as less at risk thanks to their broader diversification and greater substance.
A significant potential for damage is attributed to cyberattacks, followed by another pandemic. Small companies in particular are still challenged when it comes to cyber security, as few have already taken measures compared to large companies.
Energy shortages and supply chain problems now pose major risks for less than half of companies. On the other hand, the labor shortage will remain one of the major challenges - especially as qualified employees are a key issue for the majority of companies when it comes to their company's resilience.
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