Swiss Life economists expect gradual economic recovery
Published: Thursday, Jan 11th 2024, 14:30
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The Swiss economy will not make any great leaps in 2024. However, the situation is likely to brighten up over the course of the year, according to economists at the insurance company Swiss Life. At the Swiss National Bank, meanwhile, a familiar instrument could be about to make a comeback.
Specifically, the economists at Swiss Life Asset Managers continue to expect GDP growth of 1.0 percent for the current year. "This is not a very dynamic development", said chief economist Marc Brütsch to the media on Thursday. Growth is only roughly in line with that of the population.
The reason for this is the sluggish pace of the international economy. The export-oriented sectors of the economy are feeling the effects of this in particular. And the global economy is weakening for several reasons.
Biden effect is not repeated
Further fiscal stimulus was lacking in many economies. In the USA, for example, President Biden's growth program contributed just under 2 percentage points to growth last year. These programs are not expected to be expanded in the current year.
In addition, the possibility that the US could slide into a recession after all cannot be ruled out. The historical average is that a recession only occurs around nine months after the last interest rate hike in an interest rate cycle. The last increase was last July.
China also offers no hope. "The country is on the brink of deflation and will no longer be able to play the role of a growth engine," says Brütsch. Last year, Swiss exports of goods to China had already slumped by over 6 percent. Swiss tourism is also feeling the effects of the lack of visitors from the country.
End of the purchasing power crisis
Despite all this, Swiss Life economists expect the situation to brighten up from the middle of the year. According to Brütsch, the main reason for this is an "end to the purchasing power crisis" in key economies. On a rough estimate, real wage increases of around three percent are emerging in Germany and France. "That is a strong stimulus," says the chief economist.
In addition, key interest rate cuts are on the horizon, which will also help the global economy. Specifically, Swiss Life expert Daniel Rempfler expects the first interest rate cut in the eurozone in April and then in the USA in July. Overall, he predicts interest rate cuts of 150 basis points by the ECB and 125 basis points by the Fed in the current year.
Foreign currency purchases again
The Swiss National Bank (SNB) is expected to cut interest rates twice this year - in September and December - by 0.25 percent each, which is unproblematic in view of inflation (forecast: 1.7 percent). However, as the cuts will be lower than in the eurozone, this will lead to another problem: the franc will become too strong.
Rempfler therefore believes it is likely that the SNB will buy foreign currency again in the foreseeable future in order to weaken the franc. It will opt for this instrument because it does not want to lower interest rates towards 0 again, he says.
At what exchange rate the SNB will act, however, is an open question. The euro-franc exchange rate recently fell to well below 0.93. "I assume that the SNB has currently reached its pain threshold," says Rempfler. It will certainly not accept rates below 0.90.
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