Below-average growth also expected for 2016

Bern, 17.09.2015 - Economic forecasts by the Federal Government’s Expert Group – Autumn 2015*. The sharp rise in the value of the Swiss franc from mid-January put a significant brake on the Swiss economy during the first half of 2015. Despite a slight easing in the exchange rate situation over the last few weeks the Expert Group continues to anticipate that the economy will remain very subdued in the second half of the year and is likely to only start to strengthen again during the course of 2016. A key prerequisite for an improvement in the economic situation is that the global economy remains on an upward course and, in particular, that the Euro zone is able to continue its recovery. Overall growth in GDP for 2015 is expected to be 0.9% (June forecast: +0.8%) with a moderate acceleration to 1.5% for 2016 (June forecast: +1.6%). In view of this rather restrained pace of economic activity the expected average annual unemployment rate of 3.3% in 2015 is likely to rise to 3.6% in 2016.

International economy
The global economy reported a moderate growth dynamic in the first half of 2015, which was marked by opposing trends between developed and emerging markets. Whilst the U.S. economy regained momentum after a restrained start to the year and the slow recovery continued in the Euro zone, there was a further slowdown of the economy in many developing markets. Countries such as Brazil and Russia are suffering significantly in uncertain political conditions as well as from falling commodity prices and to date have not managed to find their way out of the recession.

Over the summer the focus of attention moved in particular to the uncertainties surrounding economic development in China. The structural slowdown in economic growth, which has already been taking place over several years (from over 10% up to 2011 to 7% in the first half of 2015), has been joined by increased fears of a looming economic downturn (hard landing). Both the sudden correction in the Chinese stock market boom as well as the central bank allowed the exchange rate against the U.S dollar to fluctuate within a band - followed by a devaluation of the Yuan against the U.S. dollar - caused uncertainty on the international financial market. However, there are as yet no clear signs of a sharp downturn in China’s real economy. As such, positive indicators from the service sector and consumption offset distinctive trends of weakness in industry and the real estate market. Accordingly, a continuation of the slower pace of growth in the Chinese economy appears more likely as a worsening crisis with a strong negative impact on the global economy.

As in the course of the previous year, the subdued impetus from the emerging markets is also likely to cause some slowdown in global trade and exports of the developed countries over the coming quarters. However, the world economy appears to be sufficiently strong particularly in the United States but increasingly also in the Euro zone to be able to cope with this without any major setbacks. Growth in the USA is projected to strengthen to 2.5% in 2015 and 2.8% in 2016. However, in view of the increased economic uncertainty, the appreciating US dollar as well as the lack of inflationary pressures, there is now a greater probability that the Fed will postpone for several months the first increase in the base rate, which until recently had been expected at the end of September.

The economy in the Euro zone grew in the 2nd quarter by 0.4% (compared to the previous quarter), representing a moderate recovery. This is also being increasingly reflected on the labour market. In July, the unemployment rate in the Euro zone fell back below 11% for the first time since February 2012, to 10.9%. The trend of a gradually improving economy is likely to continue over the coming quarters and next year. The dampening effects arising from the emerging markets are being offset by the economic stimulus of the further drop in oil prices of around $10 in recent weeks. In addition, the impact of the expansionary monetary policy should start to be felt and the financial policy in most Euro member states is less restrictive than it has been in previous years. Against this background, the Euro zone is expected to continue a slight pick-up in GDP growth from 0.9% in 2014 to 1.3% in 2015 and 1.6% in 2016 (June forecast: 1.4% in 2015; 1.7% in 2016).

The overall prospects for the international economic environment therefore remain relatively positive. However, the global economic acceleration is likely to be somewhat slower than anticipated in the last forecast (by June 2015) due to the weaker tendencies in emerging markets.

Economic outlook for Switzerland
In the first half of 2015, Swiss economic growth came near to a full stop. Impetuses for growth came from domestic demand, in particular from private household consumption and investment in equipment. The appreciation in the Swiss franc from mid-January and slightly weaker dynamic of global trade had a negative impact on the exports of goods and services. In view of the exchange rate situation and the slight downward adjustment in the expectations for the global economy, the Federal Government’s Expert Group expects negative contributions to growth by the balance of trade for the year 2015 (weaker performance by exports compared to imports). In the year 2016 the balance of trade is expected to contribute positively to GDP growth.

Furthermore, the appreciation in the Swiss franc from mid-January has been reflected in sharp declines in prices across a broad front. Foreign trade prices (export and import prices) as well as domestic producer and consumer prices have fallen sharply during the course of the year. On the one hand, the sharp declines in prices are an expression of painful margin losses by many companies in order to remain competitive. On the other hand, however they also in part reflect lower costs for companies, such as lower purchase prices for imported inputs, including in particular petroleum products.

Over the summer the mood amongst Swiss companies appears at least not to have worsened any further. As such, recently (July/August) key sentiment indicators such as the KOF surveys and the Purchasing Managers Index (PMI), which had deteriorated significantly during spring, show signs of stabilization. The slight easing of the exchange rate environment primarily against the Euro could have helped to stabilize. Since the agreement reached in the Greece crisis in mid-July the Swiss franc has fallen slightly against the Euro. Even though the Swiss franc has risen in value against several emerging market currencies at the same time, the exchange rate situation is currently more favourable than in June, although it still remains tense.

The Expert Group continues to expect the economy to remain very subdued in the second half of the year and to only strengthen during the course of 2016. Overall GDP growth for 2015 is projected at 0.9%, with a slight acceleration to 1.5% in 2016 (June forecast: + 0.8% 2015, + 1.6% 2016). Accordingly, the Swiss economy would post for the two years significantly lower than average growth relative to potential growth which is in the range of around 2%.

Domestic demand is likely to remain an important pillar of the economy, albeit with some limitations. For example, following the high growth rates of recent years there are signs of a slowdown, particularly in construction investment which have provided key support for the economy since the financial crisis. By contrast, private consumption should continue to grow thanks to continued population growth and rising real wages even if the gloomy labour market outlook could dampen consumption. With regard to investment in equipment, given the subdued economic outlook there is little prospect of an acceleration in the pace of expansion.

Due to the restrained economic dynamic the labour market is likely to be weakened in the coming quarters. The exchange rate shock of mid-January has not yet shown any negative effects on overall employment; the employment rate continued to rise in the 2nd quarter 2015. From the sectoral viewpoint however, the employment rate only rose in the services sector, whilst particularly in industry, including the construction sector, it showed a slight fall. The Expert Group anticipates that these divergences could be further reinforced in the coming quarters. Employment is expected to grow by an annual average of 0.9% for 2015 and by 0.8% for 2016. Since spring 2015 the seasonally adjusted unemployment rate has been slowly rising and this unfortunate trend is likely to continue into next year. For 2015, the Expert Group anticipates an unchanged annual average unemployment rate of 3.3%. As a result of the anticipated hesitant economic recovery the forecast for 2016 was corrected slightly further upwards to 3.6% (June forecast: 3.5%).

The strong downward momentum in prices should gradually ease as the effects of the appreciation in the Swiss franc fade away. For the current year the Expert Group expects consumer inflation to be markedly in negative territory at – 1.1% and nearly zero inflation
(+ 0.1%) for 2016

Economic risks
In view of the stronger downturn in emerging markets, the global economic risks are likely to have increased compared with the June forecast. If some of the developing countries should run into a more serious crisis and if, against all expectations, the industrialised countries were to experience another downturn, the Swiss economy would have only limited chances to grow. Within the Euro zone moreover, there remains a latent risk although the Greek debt crisis has been contained, the problems of indebtedness and lack of competitiveness have not been resolved. Therefore, increasing uncertainty affecting the stability of the currency union cannot be rule out and this would quickly impact on the EUR/CHF exchange rate.

In addition to the strength of the currency, other decisions in recent years have increased the uncertainty for the Swiss economy, in particular with regard to decisions on business location and investment. The lack of clarity on the future control of immigration and the future of the bilateral agreements with the EU to mention just two.

On the other side, there is a specific positive risk of a better than expected improvement in the economy. For example, although some sectors have come under strong pressure, the development in the first half of 2015 shows a certain level of resistance on the part of the economy as a whole. There are also currently signs of a slight easing in the exchange rate situation, as well as a stabilization of some of the key economic indicators (PMI, KOF surveys).

*The Federal Government’s Expert Group on Economic Forecasts publishes forecasts for Swiss economic development on a quarterly basis. This media release comments on the current forecast of March 2015. The current edition of “Economic Trends” (“Konjunkturtendenzen”), a quarterly publication from the SECO, integrates these forecasts and goes into more detail on other aspects of the current economic development. This publication appears in printed form as an appendix to the magazine “Die Volkswirtschaft” ( It is also available free of charge in PDF format on the Internet (

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Last modification 28.01.2021

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