UK Markets closed

Swiss government expects economy to grow by weaker than average 1.1% in 2023

Shoppers are seen under Christmas illuminations in Zurich

ZURICH (Reuters) - The Swiss government expects the country's economic growth to cool to a below average rate of 1.1% in 2023, before growth accelerates to 1.5% next year, it said on Thursday.

The country's economy will slow from the 2.1% growth rate achieved in 2022, albeit slightly above the 1% level forecast in December, the State Secretariat for Economic Affairs (SECO) said.

"This would be significantly below average but not drive the

economy into recession," SECO said. "The energy situation in Europe has eased in recent months. However, inflationary pressure remains high internationally."

In 2024 the Swiss economy, when adjusted for sporting events, is expected to grow by 1.5%, slightly down from the December forecast of 1.6%.

Both forecasts are below average GDP growth in Switzerland, traditionally one of Europe's more resilient economies, where output expanded by an average of 1.8% between 2012 and the pre- pandemic year 2019.

The Swiss economy grew by 2.1% in 2022, according to provisional calculations published by SECO last month.

Switzerland has benefited from a mild winter which meant Europe skirted an energy crisis, while blockages and bottlenecks in supply chains have continued to ease.

Still Swiss inflation has remained more persistent than previously expected, a situation which is reducing spending power of consumers.

Monetary policy has also become more restrictive, with interest rates hikes expected in Switzerland and abroad, dampening demand from businesses and consumers.

Swiss inflation is expected to fall from 2.8% in 2022 to 2.4% this year, SECO said, before dipping to 1.5% in 2024.

The forward-looking KOF Economic Barometer rose to 100 in February, continuing a recent positive trend, while the Swiss engineering sector has sounded a cautiously optimistic note for this year.

Credit Suisse on Wednesday said it expected the Swiss economy to grow by 0.8% this year, before growth picks up again to 1.4% in 2024.

The Swiss National Bank is due to give its latest economic forecasts when it announces the outcome of its quarterly monetary policy review on March 23.

(Reporting by John Revill; Editing by Sonali Paul)