Switzerland projection note OECD Economic Outlook November 2023

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Switzerland Real GDP is projected to grow by 0.9% in 2024 and 1.4% in 2025. Tighter financial conditions, heightened uncertainty and weaker global trade growth will weigh on private investment and exports. Rises in rents and electricity prices will push inflation above 2% in 2024, before it returns to the Swiss National Bank’s target range of 0-2% in 2025. These higher prices will moderate household consumption. Further weakness in foreign demand, energy supply disruptions and a sharp house price correction are key downside risks to activity. Monetary policy should remain tight to ensure that inflationary pressures subside. Continued low fiscal surpluses are appropriate. Structural reform is needed to tackle population ageing and challenges due to the green and digital transitions. Increasing labour market participation, notably of mothers and older workers, would help alleviate labour shortages. Faster emission reductions and further electrification would improve environmental sustainability and increase energy security. The economy has stagnated amid slower global growth Economic growth has weakened in 2023. Past monetary tightening to fight inflation is cooling the economy, particularly investment spending. Manufacturing activity has stalled, with slow demand in trading partners weighing on exports. The KOF Economic Barometer, the Purchasing Manager Index (PMI) and the SNB’s business cycle indicator point to a loss of momentum in the economy. Household consumption has remained relatively strong despite very low consumer confidence, buttressed by a strong labour market. Headline inflation has retreated to the 0-2% target range since June 2023, after peaking at 3.5% in August 2022. This decline largely reflected lower import prices, with consumer price inflation of domestic goods and services remaining above 2%. Longer-term inflation expectations of companies and financial analysts have stayed within the 0-2% range.

Switzerland

Source: Swiss National Bank; KOF Swiss Economic Institute; and Federal Statistical Office. StatLink 2 https://stat.link/zj64bm

OECD ECONOMIC OUTLOOK, VOLUME 2023 ISSUE 2: PRELIMINARY VERSION © OECD 2023


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