The Swiss economy’s growth appears to be buoyed more by immigration trends than by domestic productivity, according to Raiffeisen’s latest semi-annual economic forecast. The report highlights that challenges in the global economy, particularly from the U.S. and EU, are casting a shadow over Switzerland’s economic outlook.
As trade relations with the U.S.—Switzerland’s second-largest trading partner—remain precarious, Raiffeisen’s economists caution that the impact of potential tariffs looms large. Negotiations have been sluggish, with possible tariffs on the Swiss pharmaceutical industry still on the table. “The market underestimates that Trump is focused on increasing tariff revenues, not on reciprocal tariffs,” warned Chief Economist Fredy Hasenmaile, during a web call.
Hasenmaile projected that regardless of the severity of any final tariff measures, the pervasive uncertainty is stifling the industry, predicting a loss of momentum in the latter half of the year.
Switzerland experienced a paradoxical first half of the year, driven initially by pre-emptive purchases but ultimately leading to a significant downturn. After a robust boost in the first quarter, economic activity fell to its lowest level in over 15 months.
Raiffeisen now forecasts GDP growth of 1.1 percent for the current year and 1.0 percent for the next, a considerable drop from earlier projections made in December 2024, which had assessed a 1.3 percent growth for 2025. “The return to potential growth of around 1.5 percent is further delayed,” Hasenmaile noted, positioning Raiffeisen on the conservative end of economic forecasts.
The outlook for Swiss industry is bleak, with purchasing manager indices indicating poor business conditions. Domestically focused small and medium enterprises (SMEs) are faring better, continuing on a growth trajectory. Conversely, export-driven firms are witnessing dwindling demand, particularly from Germany, with only 20 percent anticipating any improvement.
The service sector, which had seen sustained positive momentum for nearly a year, has now dipped below the growth threshold in the purchasing managers’ index, indicating rising concerns.
Despite the uncertain industrial backdrop, Swiss consumer spending remains robust, bolstered by wage increases and low inflation contributing to real wage growth. Yet, signs of a cooling labor market are increasingly evident.
The labor market mirrors the economy’s mixed expectations, with the KOF employment indicator showing signs of weakness. Surveys reflect a dip in hiring intentions, hinting at slower employment growth and a seasonally adjusted uptick in unemployment. “So far, the industrial downturn has hardly affected the service sector,” Hasenmaile pointed out, “but even the previously resilient domestic market could encounter challenges as the year progresses.”
As uncertainties around tariffs persist, they have become a significant hindrance to Switzerland’s return to potential growth, raising the proverbial elephant in the room. Hasenmaile commented on the Swiss National Bank’s (SNB) interest rates, stating, “Zero is not negative,” and he does not foresee the SNB pushing rates back into negative territory soon.
The robust Swiss franc plays a critical role in shaping interest rate policy conditions. The current strength of the dollar has also lent a hand to the eurozone. While further rate cuts are anticipated in the eurozone and the U.S., where more flexibility exists, Hasenmaile believes the European Central Bank is likely to keep rates steady in July.
Two consecutive years of moderate economic growth could potentially lead to a decline in per capita economic output in Switzerland. With the economy largely expanding due to population growth rather than productivity, maintaining pace with demographic changes remains a crucial factor. Hasenmaile predicts a population growth rate of 0.9 percent for 2025, falling slightly to 0.8 percent the following year. “Net immigration depends heavily on the domestic labor market and developments in the EU,” he concluded.
Raiffeisen’s analysis reveals significant regional disparities within Switzerland. While sectors driven by population growth—such as retail, education, and healthcare—are thriving, autonomous sectors like industry and IT services are either stagnating or contracting in many regions. Zurich stands out, accounting for over 40 percent of autonomous growth, particularly in IT and consulting services. Central Switzerland and parts of western Switzerland, like Nyon and Rolle–Saint-Prex, are resisting the tide of deindustrialization and showing dynamic growth, although the overall contribution to growth from autonomous sectors has diminished.
What factors are currently impacting Swiss economic growth?
Key factors include global economic uncertainties, particularly concerning trade relations with the U.S., and substantial net immigration which has bolstered growth.
How is the industrial sector performing in Switzerland?
The industrial sector faces challenges, with many companies reporting poor business conditions and declining demand, especially from export markets like Germany.
What is the outlook for interest rates in Switzerland?
The Swiss National Bank is not expected to move interest rates into negative territory, as existing economic conditions do not warrant such a drastic measure.
