The Swiss economy should continue to grow this year, despite the strong Omicron wave. However, this will not be as strong as in 2021, according to Raiffeisen economists.
These confirmed on Wednesday their forecast for growth in Switzerland’s gross domestic product (GDP) in 2022, which should be 2.5%, against 3.5% in 2021. The latest forecasts from Raiffeisen date back to the beginning of December , while the consequences of the Omicron variant were still difficult to predict. As for inflation, it is still expected at 1.5%, due to the strength of the franc.
If the chances of recovery of the Swiss economy are intact, the level of uncertainty remains high, underline the experts in a press release.
Limited Omicron impact
Unlike the United States and the euro zone, Switzerland should not see a rise in key rates in 2021, underlines the bank. For Martin Neff, chief economist of Raiffeisen, the Swiss economy should return to its pre-pandemic growth level this year. Covid-related restrictions will only have affected the economy temporarily, with decreasing intensity with each new wave. This should also be the case for Omicron.
Even with an explosion in infections and an unprecedented number of quarantines, Raiffeisen economists estimate losses from worker absences at the equivalent of 0.3% of annual GDP.
After a difficult start to the year, the Swiss economy should return to growth for the rest of the year. ‘The impact of the coronavirus was able to be absorbed surprisingly quickly in Switzerland,’ they write.
Employment is picking up
State support measures, mainly including partial unemployment benefits, Covid credits to companies and aid for hardship cases, have made it possible to avoid a wave of bankruptcies and massive job losses. Meanwhile, the unemployment rate is almost back to its pre-crisis level.
For the whole of 2022, Martin Neff expects an unemployment rate of 2.3%, compared to 3.0% in 2021.
Raiffeisen economists locate the potential for catch-up mainly in the personal services branches, which have been badly shaken throughout the pandemic. ‘In Switzerland, inflation remains under control, in particular because of a Swiss franc which always tends to strengthen’, they explain.
The inflation should certainly climb to 1.5%, against 0.6% in 2021. But this remains very moderate in international comparison, they note.
Faced with galloping inflation, central banks can no longer maintain their very accommodative monetary policy. In the United States, interest rates should therefore be raised three times this year. The ECB could give a first turn of the screw in early 2023.
‘It would also increase the scope for the Swiss National Bank to at least initiate an exit from negative interest rates. But that certainly shouldn’t happen before 2023,’ said Martin Neff.
/ ATS
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