Switzerland: Slowing growth – ING

Charlotte de Montpellier, economist at ING, suggests that Switzerland’s GDP growth is already negatively impacted by slowing global growth, trade disputes, very weak growth in Germany and global uncertainties.

Key Quotes

“After two quarters of negative growth at the end of 2018, growth returned to positive territory in the first half of 2019 (0.4% QoQ in the first quarter and 0.3% QoQ in the second). But a lot of clouds are hanging above the Swiss economy. Investments are falling sharply. Leading indicators are tanking. The composite PMI fell to 43.4 in September, its lowest level since 2009. The KOF leading indicator is also down, to 93.2 in September, well below the long-term average.”

“We believe that GDP growth should reach 0.9% in 2019, considerably down on thee growth observed in 2018 (2.8%), which was boosted superficially by major sporting events (because of television broadcasts rights being collected by companies based in Switzerland). For 2020, we expect GDP to grow at 1.2%.”

“Both in 2019 and 2020, household consumption is expected to support growth. Indeed, the situation on the labour market is still favourable (2.3% unemployment rate) and the decline in inflation tends to boost households' purchasing power.”

“The economic risks are clearly tilted to the downside. An intensification of trade tensions between the United States and China or a trade battle between the EU and the United States could weigh heavily on the Swiss economy. It is the same with a no-deal Brexit agreement or a very strong deterioration of relations between the EU and Switzerland. Turbulence in the financial markets could also push the Swiss franc higher and lead to a decline in Swiss exports.”