In this Swiss State Secretariat for Economic Affairs report published today, the government painted a brighter picture of the economy. Growth forecasts for 2018 and 2019 were both revised up. Also, 2018 inflation forecast was revised notably higher. The report titled Economy continues dynamic recovery noted that “the economy to continue its dynamic recovery and anticipates strong GDP growth of 2.4% in 2018. The buoyant international economy is supporting foreign trade, while a favourable investment climate is stimulating domestic demand.”
Here are the latest projections
- 2018 GDP forecast at 2.4%, revised UP from prior forecast at 2.3%.
- 2019 GDP forecast at 2.0%, revised UP from prior forecast at 1.9%.
- 2018 CPI forecast at 0.6%, revised notably up from prior forecast at 0.3%
- 2019 CPI forecast at 0.7%, unchanged from prior forecast at 0.7%
The tone of the report was very upbeat as it said “Switzerland’s economy has not looked this healthy since the minimum euro exchange rate was discontinued in early 2015. The upturn gathered increasing momentum and became more broad-based in the second half of 2017.”
Also, “the healthy global economy is boosting international demand for Swiss products and therefore driving foreign trade.” And, “the Expert Group predicts that foreign trade will provide a significant boost to growth in 2018 especially but also in 2019.” Regarding the job market, the reported noted that unemployment has been in ” gradual decline since mid-2016, while employment also stepped up in the second half of 2017.”
Regarding economic risks, SECO saw short-term positive and negative risks are “balanced”. Upturn in global economy could help depreciate the Swiss Franc further and “give the Swiss economy a further boost”. But warned that “protectionist measures recently announced in the US pose negative risks for the global economy.” And, “any escalation to a trade war between the major economic zones would have a considerable dampening effect in the medium-term.”
Besides, the report pointed to recent Italian election as “a certain political uncertainty remains on the international stage.” Unclear Brexit terms and uncertainties in Switzerland’s relationship with the EU are other risks mentioned. Domestically, there is risk of sharp correction in construction sector.