Swiss Economy in Q3November 23, 2023
The beginning of the year was quite strong for the Swiss economy, but now it has entered the era of stagnation. For the whole year the gross domestic product is expected to be at 1.3%, whereas for last year it was at 2.1%. still the result is better than in the neighboring countries, as for eurozone the GDP is predicted to be just 0.7%, as per the International Monetary Fund (IMF) data. What is the reason for stagnation? Switzerland’s economy is heavily affected by the poor economic conditions around the world and difficulties faced by its two most important trading partner, China and Germany.
When it comes to inflation, situation is mixed. It has slowed down in last months, moving under 2%, within the range of 0-2% set by the Swiss National Bank. However, prices are set to rise again in the last quarter of the year. Experts at the SNB predict above 2% of inflation. When it comes to interest rates, the SNB indicated in September that it was maintaining its benchmark rate at 1.75%. it was raising interest rates to fight off inflation. It still does not rule out further hikes to ensure price stability in the medium term. Strong exchange rate of CHF is helping in keeping inflation lower, but experts also predict that Swiss franc rate will fall down versus its counterparts next year.
Switzerland is facing a labour shortage. At the end of August, there were more than 120,000 unfilled job posts, both for residents and cross-border workers, according to data from the Federal Statistical Office showed. The unemployment is expected to rise slowly, with SECO expecting it to be at % this year, and 2.3% next. It will be a result of the lack of dynamism in the economy and high interest rates.
Good news come from watchmaking industry, as for the period January-September, shipments of famous Swiss watches abroad exceeded CHF19 billion ($21 billion) , standing 8.6% higher than in 2022, as per data from the Federation of the Swiss Watch Industry. These number exceeded analysts’ expectations. For example, Bank Vontobel was forecasting growth of only between 1% and 3% this year.
Also good situation is observed in Swiss tourism, despite the very good exchange rate of CHF that makes holidaying here expensive, global conflicts and economic harsh conditions around the world. The tourism in Switzerland is expected to set hit new record this year. At the end of October the research institute BAK Economics forecast that the annual number of overnight stays would exceed 40 million for the first time ever.