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Economic pessimism slowly subsides

Updated at 31 Jan 2024 10:00 am

Financial analysts are gradually becoming less pessimistic about the economic outlook for the Swiss economy. Although the corresponding index remains in negative territory, it is steadily improving.

The UBS CFA indicator published by UBS rose by 4.2 points to -19.5 points in January, according to a statement on Wednesday. This is the 23rd time in a row that the value has been in the red. However, excluding February 2023, it climbed to its highest level in two years. A negative value indicates that survey participants are cautious about economic growth in Switzerland over the next six months.

The analysts surveyed forecast that the Swiss economy will grow by 1.3% in 2024. The figure for 2025 is 1.5 percent, they add. A majority of respondents continue to describe the current economic situation as "normal". None of the analysts expect the economy to shrink in the current year.

According to estimates, the current difficult situation in the global economy is likely to return to normal by 2025 at the latest. However, the assessment of the foreign trade environment is currently still quite mixed. While the respondents view the economic situation in the USA quite positively, they see it as weak in Europe and even very weak in China. This is reflected in the rather subdued export momentum, which, according to the analysts, is unlikely to improve in the coming months.

Inflation risks low

Inflation has also become much less frightening for the participants. They expect prices to rise by just 1.7% in the current year and then by 1.5% in 2025. For the current year, only 9% of experts believe that inflation could exceed the 2% mark.

As the expectations are clearly within the SNB's target corridor, the majority of survey participants (88%) expect the SNB to cut interest rates in 2024. The expectation of a slight interest rate cut predominates. Almost half of the analysts anticipate a reduction in the key interest rate by 25 basis points to 1.5%.

According to UBS, the assessment of future monetary policy has thus changed significantly. As recently as October, only a quarter of analysts expected interest rates to be cut in the next twelve months. In July 2023, as many as 75 percent expected further interest rate hikes. Their share has now fallen to 3 percent.

The survey took place between January 18 and 25, with 36 analysts taking part.


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