Swiss economy is growing surprisingly – what’s next?

Swiss economy is growing surprisingly – what’s next?

The Swiss economy appeared robust in the first quarter of 2025 and recorded real GDP growth of 0.8 percent compared to the previous quarter. This positive development exceeds the first estimate by the State Secretariat for Economic Affairs (Seco), which had previously forecast growth of 0.7 percent. According to Felicitas Kemeny, the economic manager at Seco, the economy is in a dynamic state.

The drivers of this growth are, among other things, pull-forward effects in exports, which are heavily influenced by US President Donald Trump's tariff threats. The chemical-pharmaceutical industry in particular benefited significantly, with pharmaceutical exports rising by over a third in March before falling by almost a quarter in April. The service sector and domestic demand also contributed positively to economic development. In contrast, however, the hospitality industry recorded a decline in value added after a strong previous quarter.

Challenges caused by new customs regulations

While Seco classifies the current situation as positive, economic experts are already warning of a possible slowdown in growth. Foreign trade is showing signs of a countermove and the weekly economic activity index is signaling a slowdown. A look at the future challenges shows that the US tariff threats could have a negative impact on economic growth over the course of the year. The mechanical, electrical and metal industries in particular are feeling the effects of declining value creation.

The Purchasing Managers' Index (PMI) fell to 42.1 points in May, the lowest level since December 2023, indicating contracting economic activity. For 2025 as a whole, GDP growth of around 1 percent is estimated to be realistic, which is roughly the same as the previous year. Furthermore, GDP growth for 2024 has been revised to 1.0 percent, which is below the long-term average of around 1.7 percent.

Lowering growth forecasts

20min.ch reported, uncertainties and in particular the new US tariffs represent considerable challenges. Real GDP growth of 1.2 percent is now expected for 2025, previously the estimate was 1.4 percent. The forecast for 2026 was also lowered from 1.5 percent to 1.2 percent.

The US tariffs, which amount to up to 30 percent on imports from China and 10 percent on products from the EU, Japan and South Korea, are expected to reduce global trade volume by more than a third. These high tariffs and the associated uncertainty mean that companies in Switzerland are hesitant to make investments. Investment activity in machinery and equipment for 2025 will be reduced from +1.2 percent to -0.1 percent.

The domestic economy, on the other hand, remains robust, particularly consumption and construction investments. This is mainly due to strong population growth through immigration, stable inflation expectations and constant interest and exchange rates. Despite the uncertainties, consumer spending by the Swiss population remains stable.

However, the unemployment rate is expected to rise to 2.9 percent in 2025 and to 3 percent in 2026, whereas it was 2.4 percent in 2024. The combination of positive developments and increasing challenges will present the Swiss economy with exciting but also complex tasks in the coming quarters.