Swiss growth expected down, inflation up

Posted 29 March, 2022

GDP should only grow by 2.5% this year, against +2.8% in previous estimates, the KOF said.

Economists polled by the economic research institute KOF expect a deterioration in Swiss economic growth this year and an acceleration in inflation, in the context of the war in Ukraine and a global surge in prices.

The 18 experts surveyed by the Zurich institute have lowered their expectations for the gross domestic product (GDP). The latter should only increase by 2.5% this year, against +2.8% in previous estimates, the KOF said in a press release on Tuesday.

For 2022, investments in capital goods and construction have been revised downwards, as well as exports, which should only grow by 4.1%, against the +5.2% estimated so far.

Next year, economists expect average GDP growth of 1.7% and long-term growth of 1.6%.

Conversely, they have significantly corrected their inflation estimates upwards, which should rise this year to 2%, against 1% in the previous estimates. In 2023, the acceleration in prices should ease somewhat to 1.1%.

In terms of employment, the unemployment rate should hardly move too much. It is expected to be 2.4% this year, 2.3% the following year, and again at 2.4% within five years.

With the war in Ukraine, the franc, playing its role as a safe haven, appreciated significantly. After briefly falling below parity with the euro in early March, the Swiss currency recovered. On a three-month horizon, economists see the currency pair settling at 1.03 EUR/CHF, roughly the current level. Within 12 months, the franc should weaken further against the single European currency towards 1.04 EUR/CHF.

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