Finance & Economics

Swiss Economy Demonstrates Growth

As the results of last year, the Swiss economic system unexpectedly maintained a positive dynamic, even though the manufacturing sector in this country continues to be a factor of negative impact on the corresponding growth prospects.

Swiss Economy Demonstrates Growth

In the fourth quarter of 2023, the gross domestic product (GDP) of the mentioned country showed an increase of 0.3%. The relevant information was published by the Swiss Federal Statistical Office on Thursday, February 29. This indicator has been adjusted to take into account major sporting events.

The increase in Swiss GDP in the last quarter of 2023, in terms of intensity, corresponds to the pace that was recorded during the previous three months. Moreover, this growth exceeded the preliminary expectations of analysts surveyed by the media. Experts believed that in the last three months of 2023, Switzerland’s GDP would show growth of 0.1%.

In general, over the past year, the economy of the mentioned country has demonstrated positive dynamics. The corresponding indicator for 2023 increased by 1.3%. Analysts had expected this figure to show a growth of 0.7%.

Switzerland’s GDP, excluding sporting events, grew by 0.8%. In 2022, this indicator showed an increase of 2.7%.

The Swiss Federal Statistical Office said that after a positive previous quarter, there was a decrease in value added in the manufacturing industry. This negative result is due to the deterioration of economic performance in the sectors of the chemical and pharmaceutical industries. The specified state of affairs is due to a drop in exports. It is also noted that other segments of the Swiss industry showed growth after two quarters during which the dominant tendency was a negative dynamic.

The data released on Thursday shows that in Switzerland, as in many other European countries, there was only one quarter of contraction last year.

The Swiss manufacturing sector was affected by a pressure factor, the components of which were the strong franc and the low level of global demand for products produced by local companies. At the same time, problems in this area are compensated by the sphere of services. In this context, the tourist sector is of particular importance, demonstrating the dynamic of high-intensity development.

Economists predict that Swiss GDP will continue to be on a growth trajectory in the coming quarters.

The Zurich-based KOF Center for Economic Research claims that Swiss companies are currently showing a higher level of confidence about the business outlook over the next six months. Also, the economic report of this organization notes that the current version of the vision of the future differs from previous expectations with stronger optimism. The corresponding positive mood is especially relevant for the manufacturing industry. At the same time, the situation in this sector continues to be difficult. More than 50% of companies operating in the manufacturing industry report the problem of low demand. The potential further strengthening of the franc for these firms will be a pressure factor. At the same time, the current situation is not as negative as it was at the beginning of 2015. Nine years ago, companies faced a critically high level of economic pressure against the background of the decision of the authorities to remove the franc floor against the euro. However, the complex configuration of the modern economic reality does not prevent the strengthening of faith that the worst-case scenario will not be realized.

Also, a positive attitude towards the prospects for business development shortly is typical for Swiss service providers. At the same time, at the beginning of the year, the hospitality industry and financial and insurance service providers complained about a decrease in activity.

In the wholesale sector, there is a decrease in the level of skepticism in the context of the vision of the future. In the retail area, an optimistic attitude is not dominant in the assessment of prospects. In this sector, the priority of a restrained approach to forecasting performance shortly is fixed.

The KOF report indicates that Swiss companies expect gross wage growth of 2%. Firms maintain their intention to continue hiring staff, but the scale of the corresponding plans has decreased compared to 2023. At the same time, some companies claim a shortage of specialists. However, this problem is not as critical as it was at the beginning of last year.

The expectations of Swiss companies regarding the prospects for inflation have improved. In October, firms predicted that the corresponding figure would be 2.4% over the next 12 months. In January, the companies adjusted their expectations. The current version of the forecast provides for inflation at the level of 1.9% over the coming 12 months. About 4,500 companies participated in the KOF Business Tendency Surveys.

The Swiss National Bank can give an impetus to the positive dynamic economy. The financial regulator is expected to start lowering interest rates this year. So far, there are no signs that any specific measures in the framework of monetary policy easing will be announced at the meeting of the Swiss National Bank scheduled for March. This means that interest rate cuts are likely to begin closer to the summer or in the second half of 2024.

It is expected that the growth rate of the Swiss economy in the current year will be slower compared to preliminary forecasts. This perspective is a kind of consequence of the eurozone’s sluggish momentum.

As we have reported earlier, Swiss National Bank Fixes High Demand on Cash.

Serhii Mikhailov

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Serhii’s track record of study and work spans six years at the Faculty of Philology and eight years in the media, during which he has developed a deep understanding of various aspects of the industry and honed his writing skills; his areas of expertise include fintech, payments, cryptocurrency, and financial services, and he is constantly keeping a close eye on the latest developments and innovations in these fields, as he believes that they will have a significant impact on the future direction of the economy as a whole.