Economy According to UBS, the Swiss economy will recover in 2025

The economists at UBS are confirming their forecasts for Swiss economic growth in 2024 and 2025. And the Swiss National Bank (SNB) is likely to make a final interest rate cut in September, according to the major bank.

Specifically, UBS continues to expect economic growth of 1.3 percent for 2024. And for 2025, they continue to expect growth of 1.5 percent. Adjusted for major sporting events, which distort GDP due to license income for the sports associations based here, the forecasts are +0.9 percent for 2024 and +1.6 percent for 2025.

The Swiss economy, and industry in particular, is likely to continue to suffer from the weak economy in the eurozone in the second half of 2024, the experts explained their forecast in a press release on Tuesday.

Inflation and health insurance a burden

From 2025, however, industrial production and investments are expected to gain in importance again. Although private consumer spending will continue to grow modestly, it will no longer be the driving force behind the Swiss economy.

This is because, on the one hand, the catch-up potential following the pandemic has now finally been exhausted, explained the UBS economists. On the other hand, income will be burdened not only by inflation but also by a sharp rise in health insurance premiums.

Unemployment in Switzerland will also rise slightly over the next few quarters, but only to a small extent. The biggest risks for the Swiss economy are a strong global price increase and the various geopolitical uncertainties.

Another SNB interest rate cut

According to the big bank, inflation will only fall slowly due to second-round effects. UBS expects average annual inflation of 1.2 percent for 2024 and 1.0 percent for 2025. Inflation will therefore be significantly higher than in the last decade.

Nevertheless, this will not prevent the Swiss National Bank (SNB) from lowering the key interest rate once again. UBS expects a final rate cut of a quarter of a percent to 1.0 percent, probably in September.

However, the exact timing will depend on the development of inflation and the Swiss franc. The SNB could therefore postpone the next rate cut until inflation has fallen a little more.

SDA