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Swiss Economy in H2 – Slow Growth, Lower Inflation, Tourism Doing Well

Swiss Economy in H2 – Slow Growth, Lower Inflation, Tourism Doing Well

July 13, 2023

Economy to Grow a Bit

Forecast for economic growth in Switzerland as published in March were confirmed in June – the State Secretariat for Economic Affairs (SECO) sees gross domestic product (GDP) to grow by a modest 0.8% in 2023, but should get better in 2024, with forecast of 1.8% growth. Last year GDP was at plus was 2.1%. In the first half of this year industrial exports and domestic demand were driving forces of sustained growth. But in the second half of the year Swiss economy is predicted to slow down. It will be mainly due to the restrictive monetary policies pursued by the European and North American central banks. International demand will be lower which could hurt Swiss export.  

Inflation to Get Lower

The Swiss National Bank (SNB) meanwhile has lowered its inflation forecast for 2023 to 2.2%, compared with 2.6% previously. As prices in oil and gas sector go down, following a surge caused by the war in Ukraine, inflation pressures are being limited. Also the very good exchange rate of Swiss franc comparing to the euro and dollar helps curb inflation as costs of imported goods are reduced. Still the SNB has raised once again interest rates on June 22, by 25 basis points, to 1.75%. However, inflation forecasts for 2024 have been revised upwards, with an expected rate of 2.2%, versus 2% foreseen previously. Next year, the SNB predicts higher electricity prices and rents. Also imported inflationary pressure will likely last longer than expected.

Good Summer for Tourism

In some good news, summer is poised to look good for tourism sector. According to a survey by Switzerland Tourism, hoteliers are expected to record a much better turnover than last year. The sector is foreseeing a 27% increase in overnight stays as many tourists from outside Europe are expected to visit as the pandemic restrictions were taken down. Especially in mountain regions there is a lot of optimism towards this summer, but Swiss cities are as well excepted to welcome more tourists than in precious years. However, compared with the record summer of 2019, the situation is not yet back to the pre-Covid normality. This is mainly because visitors from China still keep away from Europe, and Swiss travelers plan to go abroad this year to make up for lost time during pandemic when they mainly were holidaying in the country.