Switzerland’s Forecast for 2019 GDP Growth is Falling Dramatically

Recently, economists have lowered their expectations for a significant Swiss economic growth in 2019. They are now expecting 1.5%, whereas in September the forecast was 2.0%. Economic growth is expected to rise by 1.7 percent by 2020, the State Secretariat for Economic Affairs (SECO) said Tuesday.

Previous forecasts released at the end of 2018 were also less positive. The SECO’s low forecast at the end of 2018 was because an unexpected slowing down in the third quarter. The Swiss economy fell by 0.2% at that time. However, SECO experts assume that export and domestic economies will return to moderate growth after the weak third quarter. However, strong growth rates can no longer be achieved in the first half of 2019.

Increased wages reduces consumption

As of the beginning of 2019, global economic “normalization” will continue after the strongly expanding phase of 2017 and 2018. According to experts, the euro zone is likely to lose momentum faster than expected in the second quarter. No strong signs of consumption are also expected. Low wages and positive inflation have reduced the purchasing power of households. The tendency to consume is therefore still low.

Low unemployment rate

Despite all of the above, the situation in the labor market remains very good, according to market experts. For example, the unemployment rate in 2019 is expected to fall to 2.4% from an average of 2.6% in 2018. For 2020 many expect the rate to be slightly above 2.5%.

Inflation in 2019 is expected to fall by 0.5%, and then by 0.7% in 2020, which may indicate an attractive real wage for workers towards the labor market. And then, according to experts, in 2020 the consumption will recover by 1.5%. SECO experts have also justified their forecasts for slightly higher gross domestic product (GDP) for 2020.

Debt risk

The SECO has been alerting about some possible economic risks, as, for example, if the trade conflict continues to escalate, the global economy and trade markets will slow more than is currently expected by market experts.

At the same time, political uncertainty remains high in Europe. The issue of international religion was also explicitly mentioned, as was the uncertainty in Switzerland’s relationship with the European Union.


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