Switzerland expected to grow 1.3% this year, recovering from 0.8% in 2023

By Ovunc Kutlu

ISTANBUL (AA) — Switzerland's economy is expected to grow 1.3% this year, recovering from 0.8% in 2023, according to the International Monetary Fund (IMF) on Monday.

The European country's economy is later estimated to expand 1.4% in 2025, the financial agency said in a statement after its executive board concluded the 2024 Article IV consultation with Switzerland.

Weak external demand and tighter financial conditions pushed economic growth down last year, but the labor market remained resilient and the rate hit a historic low point in 2023.

In addition, the external current account surplus declined in 2023 due to lower merchanting trade and the services trade balance, said the report.

The Swiss National Bank's monetary policy, on the other hand, has successfully brought inflation back within the 0-2% stability range, and the state-facilitated acquisition of Credit Suisse by the country's largest lender UBS last year stabilized financial markets with limited spillover to the financial sector and the economy, it added.

Inflation is projected to remain within the price stability range of 1.5% on average this year, with medium-term growth hovering at around 1.5%.

The IMF, however, stressed that the economy faces headwinds related to adverse demographics trends, skills gaps, and lower trading partner growth.

"In the short term, downside risks arise from intensification of regional conflicts and an abrupt global slowdown, which could result in slower growth and trigger safe haven flows," said the report. "Over the medium-term, there are looming downside risks include from accelerated geoeconomic fragmentation and possible setbacks in strengthening EU relations.

"Commitment to free trade and global cooperation, and efforts to expand trade relations can diversify supply chains while limiting trade disruptions," it added.

The Swiss National Bank in March cut its policy rate by 25 basis points to 1.50%, becoming the first central bank among major economies to start monetary easing. It made a second interest rate cut last week by another 25 basis points to take its policy rate down to 1.25%.

Annual inflation in the landlocked country came in at 1.4% in May, while it averaged 2.1% last year.