OECD forecasts weak growth and higher inflation
Published: Wednesday, Nov 29th 2023, 11:20
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According to the OECD economic organization, the Swiss economy is unlikely to really get going in 2024. And it no longer expects inflation to ease any time soon.
The outlook for the Swiss economy has become gloomier. After real GDP growth of 0.8% in the current year, only a below-average figure of 0.9% is expected in 2024, according to the report published on Wednesday. In its last assessment in the summer, the organization had still expected growth of well over 1 percent for 2024.
The weak growth will continue until mid-2024, the OECD now writes. The Swiss economy will not pick up speed again until 2025, at 1.4 percent.
The organization's economists cite stuttering global trade and more difficult financing conditions, among other things, as reasons for the continuing weakness. There are also fears that consumption will no longer be a pillar of growth in 2024.
Above the target range
Contrary to previous assumptions, there are no longer any signs of a rapid easing in inflation. Specifically, the OECD predicts an average value of 2.1% for 2024, compared to 1.2% in the last forecast. The forecast for 2025 is 1.5 percent.
The reasons for the persistently high inflation are the rent increases and higher electricity prices, which will then dampen the willingness of the Swiss to consume.
According to the OECD, the expected rise in inflation is also likely to prompt the Swiss National Bank (SNB) to raise interest rates once again. Economists from Paris are assuming that the local monetary authorities will raise their key interest rate from 1.75% to 2% at their next meeting in just over two weeks' time.
Advice to politicians
The energy situation and developments on the real estate market remain a risk for all forecasts. As usual, the economic organization also gives advice to Swiss politicians. In view of the age structure, for example, pension cuts or higher revenues are needed.
In terms of growth, the Swiss economy would also benefit from investments in renewable energy and incentives for mothers to work full-time, according to the OECD experts.
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