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Energy worries likely to slow Swiss growth, say experts

chart showing stock market decline
Russia's invasion of Ukraine and the subsequent worries about energy sources make the economic outlook uncertain. (c) Copyright 2022, Dpa (www.dpa.de). Alle Rechte Vorbehalten

Swiss economic growth forecasts for 2022 and 2023 have been revised significantly downwards, amid uncertainty over energy supply and inflation.

A government expert group has downgraded its expectations for GDP growth to 2% in 2022, compared with the 2.6% it predicted in June. For 2023, its forecast has been revised down from 1.9% to 1.1%, according to a government press releaseExternal link on Tuesday.

After a positive first half of the year 2022, the Swiss economy now faces a deteriorating outlook, say the experts. “A tense energy situation and sharp price increases are weighing on economic prospects, especially in Europe,” reads the press release.

The Swiss economy continued to recover during the second quarter of this year, with growth driven by the service sector. Consumer spending has picked up substantially in leisure, hospitality and travel since the lifting of public health restrictions linked to the Covid-19 pandemic.

However, current economic indicators present a mixed picture, according to the experts. Inflation in Switzerland remains modest by international standards, so parts of the economy should continue to recover, but they say the challenging international environment is likely to exert increasing pressure on some segments of export-oriented industries.

The expert group has lowered its expectations for global demand, especially in Europe, the United States and China, which are Switzerland’s key trading partners. In addition, rising energy prices mean that Switzerland can also expect higher inflation than originally projected, which could dampen domestic demand. The experts now expect inflation of 3% for this year and 2.3% for 2023.

The expert group bases its forecast on the assumption there will not be a severe energy crisis with widespread production stoppages.

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