Switzerland cuts growth forecasts to account for energy risks and inflation

ZURICH—Switzerland’s government on Tuesday sharply lowered its economic growth forecast, citing increased risks from “a tense energy situation and sharp price increases”.

The country’s economy is expected to grow by 2.0% this year, below the June forecast of 2.6%.

In 2023, the economy is expected to expand by 1.1%, said the National Economic Office (SECO), down from a previous forecast of a 1.9% increase.

Numbers have been adjusted to remove the effects of major sporting events.

“After a strong first half of 2022, the Swiss economy is now facing a worsening outlook,” SECO said. “The tense energy situation and sharp price increases are weighing on the economic outlook, especially in Europe.”

SECO had raised its inflation forecast and expected consumer prices to rise by 3% in 2022 and 2.3% in 2023. Previously, he expected inflation to reach 2.5% this year and 1.4% in 2023.

Earlier this month, Germany’s three major economic institutes downgraded Europe’s largest economic outlook for next year, predicting higher energy prices due to the war in Ukraine will take its toll.

Less dependent on Russian gas and with significantly lower inflation than its neighbors in the eurozone, Switzerland has traditionally been one of Europe’s stronger economies.

SECO said the favorable unemployment situation in Switzerland, where the unemployment rate is expected to be 2.2% this year and 2.3% next year, will continue to support domestic demand.

However, demand for Swiss products from the Eurozone, the United States and China was expected to be lower than previously forecast, while foreign demand was expected to weaken.

The overall outlook for the Swiss economy is highly dependent on developments in the global economy and energy supply situation, SECO said, adding that a sharp decline in Russian gas flows has increased the risk of gas shortages in Europe. said.

Although the forecast was based on the assumption that there would be no shortages, he said the Swiss economy would be “severely affected” if gas and electricity were to decline.

Rising interest rates introduced by central banks around the world to combat inflation are also increasing problems related to global debt and financial markets, he added.