Switzerland slashes economic growth forecast, citing war risks and inflation

Shoppers walk along Bahnhofstrasse shopping street in Zurich, Switzerland, March 1, 2021. REUTERS/Arnd Wiegmann/File Photo

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ZURICH, June 15 (Reuters) – Switzerland on Wednesday became the latest country to lower its economic growth forecasts as the government warned of risks from war in Ukraine and rising inflation food and energy.

The Swiss economy is expected to grow by 2.6% in 2022, the State Secretariat for Economic Affairs (SECO) said, revising down its March forecast of 2.8% growth.

SECO also cut its growth forecast for 2023 to 1.9% from 2.0%. All figures are adjusted to remove the effect of sporting events.

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But in the negative scenario, growth could slow to 2.4% this year and the Swiss economy could stagnate in 2023 if gas supplies from Russia are interrupted, said Eric Scheidegger, deputy director of SECO.

“The direct impact of the war in Ukraine on Switzerland is limited. Exports of Swiss goods to Russia and Ukraine accounted for only 1.4% of the total last year,” he told Reuters.

“However, there is an effect of rising energy and commodity prices. Then there is inflation in general which is rising outside the country,” he said.

Scheidegger declined to speculate on the likelihood of the worst-case scenario, saying only the base case was most likely.

According to SECO’s baseline scenario, Swiss inflation is estimated at 2.5% this year before falling to 1.9% in 2023, levels Scheidegger considers tolerable for Swiss industry.

An end to Russian gas supplies – either because of a European Union embargo or a decision by Moscow – would make matters worse.

“It could lead to energy shortages in Europe and Switzerland. It would also lead to higher inflation, which would weigh on consumer spending. It would also mean more uncertainty, which would mean less investment. by companies,” Scheidegger said.

Some 47% of Swiss gas imports come directly or indirectly from Russia, according to government data.

Switzerland’s weaker growth estimates follow downward revisions by the OECD to global growth and a more cautious outlook in Germany and France. Read more

The Swiss National Bank will take the latest forecasts into account at its policy meeting on Thursday.

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Reporting by John Revill; Editing by Michael Shields and Tomasz Janowski

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