UBS economists have reduced their forecast for the growth of Switzerland's gross domestic product (GDP) for next year to 1.3 percent, down from the previous 1.5 percent. When excluding the impact of major sporting events, the projected growth rate drops from 1.7 percent to 1.5 percent.

The reason for these adjustments is the gloomy outlook for Europe, Switzerland’s most important trading partner. A slower-than-expected acceleration of the Eurozone's economy is likely to delay the recovery in the Swiss industrial sector, according to the assessment published on Monday.

Slower, But Still a Recovery

Despite the downgrade, the forecast still points to an economic recovery compared to this year. UBS expects GDP growth of around 1 percent in 2024. The forecast is based on the assumptions that consumption will remain stable, supported by declining inflation and population growth, and that the struggling industrial sector will benefit from an economic uptick in the Eurozone.

However, demand uncertainties remain. Rising health insurance premiums and an uptick in unemployment could dampen growth prospects. «On a positive note, inflation is expected to decrease more sharply than prviously forecast, with UBS predicting inflation at 1.1 percent for 2024 and 0.7 percent in 2025.»

Risiks Still Loom

Uncertainty remains regarding the Eurozone's economic performance. UBS expects a significant increase in real wages in the coming months, which should boost consumption, lead to higher capacity utilization, and spur more investments. This would also benefit the Swiss industrial sector.

However, leading indicators and consumer confidence have not yet shown signs of an imminent acceleration. «The risk remains that the Eurozone recovery will not just be weaker, but may not occur at all,» the report concludes.