Swiss economic growth is expected to slow to 0.9% in 2025, according to a new report from BAK Economics, as global uncertainties and a weakening industrial sector weigh on investment. While a recent customs agreement with the United States mitigated potential losses, ongoing risks related to trade policy and potential shifts in investment remain. The report signals a broader cooling trend, with potential impacts on the Swiss labor market and a largely stable, but slowing, consumer spending surroundings.
Keystone-SDA
Switzerland’s economic growth is now projected to be a modest 0.9% next year, as ongoing uncertainties continue to weigh on investment and the export-oriented industrial sector. The labor market outlook is also beginning to show signs of weakening.
(Keystone-ATS) The recently concluded customs agreement between Bern and Washington was already factored into previous forecasts released in August. At that time, experts anticipated securing terms similar to those obtained by the European Union, according to a new report published Tuesday by the Basel-based economic research institute BAK Economics.
“Without this agreement, the outlook for next year would have been 0.3 percentage points lower,” the report stated.
Despite the agreement, significant uncertainties remain, stemming from the unpredictable nature of U.S. trade policy and the risks associated with fulfilling the commitments made to secure the customs deal.
Specifically, “failure to meet these commitments could trigger new punitive tariffs.” Conversely, even if the commitments are met as agreed, “there is a risk of investment shifting to the United States,” potentially diminishing Switzerland’s capacity for modernization. Furthermore, the Swiss economy would be impacted by a weakening global environment, reducing demand for Swiss goods.
BAK Economics anticipates a further decline in investment next year, amid a business environment lacking significant positive momentum.
Consumer Spending Provides Stability
Consumer spending is proving to be a stabilizing factor, although its momentum is slowing. “The combination of low inflation, persistently low interest rates, and continued, albeit less dynamic, immigration supports household demand.”
However, initial difficulties are emerging in the labor market, with the slowdown in industry spreading to other sectors. The onset of the technological transition towards artificial intelligence is also hindering job creation in the service sector, BAK Economics noted.
The unemployment rate is expected to reach 3.3% by the end of 2026, while employment growth will remain subdued (2026: +0.2%, 2025: +0.1%).
This slowdown has not yet fundamentally impacted private consumption, which is only losing some of its momentum. BAK Economics forecasts consumption growth of around 1.2% for 2026, compared to 1.4% this year.
Construction Sector Remains Strong
A bright spot in the economy is the construction sector. The elimination of imputed rental value and the planned reduction in the deduction for maintenance are driving significant anticipation in renovation and transformation projects.
“This dynamic is not only stimulating demand but also driving up prices, resulting in a substantial increase in investment in the sector, at least until 2027.”
Inflation is expected to remain low at 0.3%, up from 0.2% this year, remaining within the lower end of the Swiss National Bank’s (SNB) target range. As a result, experts at BAK Economics believe the SNB will maintain its interest rates at 0%. Negative interest rates would only be considered if inflation were to fall sharply, the Swiss franc were to appreciate significantly, or the European Central Bank were to substantially lower its own rates.
