Switzerland is expected to escape a recession as global economic growth slows. Private consumption, driven by a solid labor market, should support the Swiss economy. In this context, the SNB should continue to raise interest rates
‘The situation remains positive for Switzerland’ and ‘a recession should be avoided’, said Claude Maurer on Tuesday at a press conference in Zurich. For the chief economist of Credit Suisse, households should be able to cope with rising energy prices, thanks to a solid labor market.
“Private consumption is once once more supporting” the Swiss economy, added Mr. Maurer.
Concretely, the bank with two veils expects this year to grow gross domestic product (GDP) by 2.5%, notably supported by private consumption (+4%) and exports (+4.5%). In 2023, GDP growth should however slow down significantly to +1.0%, as should the boom in household spending (+1.4%) and international sales (+3.0%).
As for inflation, it is expected to average 2.9% in 2022 and should slow to 1.5% the following year. ‘Hydrocarbon prices have reached their peak. Gasoline and heating oil prices should start to come down,’ said Maurer.
Credit Suisse specialists, however, insist that inflation has a moderate impact on consumption in Switzerland. A rise in the inflation rate of one percentage point in fact reduces household spending by only 0.11% to 0.13%.
The SNB obliged to follow
In a global context of monetary policy tightening, the Swiss National Bank (SNB) should continue with the hike in key rates that began in mid-June, but more moderately than its counterparts in the European Central Bank (ECB) and the Federal Reserve. US (Fed).
But for economist Maxime Botteron, the increase in key rates should only have a limited impact on inflation, the origins of which are due to the energy crisis, the difficulties in global supply chains and the lack of labor. in certain sectors – factors over which the SNB has little influence.
The Swiss issuing institute must however act to maintain the strength of the franc, which would depreciate if it did not act, which would make imports more expensive, insisted Mr. Botteron. ‘For this reason, the SNB has no choice but to raise its key rate further.’ A 10% decline in the euro-franc exchange rate reduces inflation in Switzerland by half a percentage point.
But the Confederation also benefits from the lower weight of energy in household spending, the strong regulation of energy prices, the relative stability of rents and a generally higher price level which tends to limit the rise in prices.
The SNB’s key rate, currently at -0.25%, should therefore be raised by 0.75 percentage points at the meeting on September 22 and by an additional 0.25 in December, so that the key rate peaks at 0.75% by the end of the year, according to Credit Suisse projections.
‘Afterwards, the SNB will take a break, because inflation will decline and the economy will slow down,’ added Claude Maurer.
/ATS
