Economic and Market Overview

Exporters were able in part to reroute goods via third countries or identify new sales markets. In addition, high levels of investment in artificial intelligence and supportive fiscal and monetary policy had a positive effect.

However, global trade growth has recently weakened, and the outlook for 2026 remains fragile. Weak labor market data and deteriorating consumer sentiment point to an economic slowdown in the United States. In China, domestic demand continues to suffer from the consequences of the real estate crisis, while exports to the US in particular are struggling with higher tariffs.

Economic performance in the euro area remained below average. Here too, higher US import tariffs are creating uncertainty, and the announced fiscal measures in Germany are increasingly showing delayed effects. In addition, certain sectors, such as the automotive industry, are facing structural change. According to OECD estimates, global growth is expected to slow from 3.2% in 2025 to 2.9% in 2026. Forecast risks remain elevated in light of geopolitical tensions, escalating trade conflicts, and their negative impact on supply chains. This could lead to a further strengthening of the Swiss franc, with adverse consequences for the export economy.

The situation in Switzerland

Economic performance in Switzerland was uneven. The first half of the year was characterized by pull-forward effects and exceeded expectations. In the second half, however, the global slowdown and US tariffs led to weaker momentum. In the third quarter, the Swiss economy contracted by 0.5% compared with the same quarter of the previous year. For the full year, the KOF Swiss Economic Institute still expects growth of 1.4%, albeit below potential.

The investment climate remains clouded by global uncertainty, weak earnings in many companies, and persistently low capacity utilization. Private consumption is providing some stabilization, although employment is declining and the unemployment rate is edging higher. Thanks to low inflation, the Swiss National Bank reduced the policy rate to 0% in June.

Swiss economic outlook

• Stable inflation trend: Inflation is likely to remain close to zero in 2026. A strong Swiss franc and lower energy prices are dampening inflationary pressures. In addition, the reduction in the reference interest rate in September will have a dampening effect on rental price developments from February 2026 onward.
• Economic growth: The reduction of US tariffs to 15% slightly improves the outlook. Nevertheless, growth of 1.1% in 2026 and 1.7% in 2027 remains below potential.
• Labor market and consumption: The weakness in the labor market is continuing. Employment growth remains subdued for the time being. Around 10 000 jobs have been lost in the machinery, electrical, and metal industries due to tariffs. The unemployment rate is expected to edge up further to around 3.1%.

Economic risks

There are several risks, most of them tilted to the downside. The implementation of the new bilateral tariff arrangement between Switzerland and the US remains uncertain in timing, and domestic political resistance could delay the process. The committed Swiss investments in the US may lead to relocation effects and dampen domestic investment activity. In addition, the pharmaceutical sector faces risks of price reductions. The federal government’s announced austerity program could have a more restrictive impact than currently assumed.

Trade conflicts, geopolitical tensions, and potential disruptions to global supply chains could further weigh on economic activity. A further appreciation of the Swiss franc would additionally weaken the export sector. On the positive side, a rapid easing of geopolitical tensions, a faster decline in inflation abroad, or a more effective implementation of fiscal stimulus in Europe could provide upside potential.