Swiss GDP Growth Slashed Amid Global Trade Tensions

Switzerland's economic growth forecasts for 2025 and 2026 have been significantly downgraded due to escalating global trade tensions and uncertainties surrounding U.S. trade policies, with GDP growth projections now at approximately 1.3% for 2025 and 1.2% for 2026, both below the long-term average. The Swiss National Bank and various economic research institutes, including SECO and KOF, highlight risks such as stretched financial valuations and the potential negative impact of U.S. tariffs on Swiss exports, which could reduce competitiveness and possibly trigger a mild recession if harsher tariffs are imposed. Despite some resilience from accelerated early-year exports, the Swiss economy faces a slowdown, compounded by weaker investment momentum and the erratic nature of U.S. trade policies, which have led to cautious government and central bank stances, including a planned modest rate cut. Inflation forecasts remain low, expected to rise slightly from 0.1% in 2025 to 0.5% in 2026, reflecting subdued domestic price pressures amid external uncertainties. The situation underscores the vulnerability of small, export-dependent economies like Switzerland to shifts in international trade dynamics, particularly under the current U.S. administration's trade approach. Overall, Swiss economic policymakers are navigating a complex environment marked by geopolitical risks and economic instability that could dampen growth prospects in the near term.