Credit risk agency Coface highlights Switzerland's stable growth outlook amid EU trade negotiations and moderate global expansion.

Switzerland's economy demonstrated remarkable resilience in 2024, achieving moderate growth despite eurozone weakness and escalating global political tensions. The Swiss National Bank's proactive monetary policy, including four interest rate cuts bringing rates from 1.75% to 0.5%, supported economic stability while maintaining low inflation expectations for 2025.

Private consumption remains a cornerstone of Swiss economic growth, bolstered by rising real wages expected to increase by 1.0% in 2025 compared to 0.5% in 2024. The government reduced the mortgage benchmark interest rate to 1.5% in March 2025, marking the first decrease since March 2020, which should benefit the 60% of households who are tenants through lower rental costs.

The construction sector shows promising signs of recovery, particularly in residential development after reaching low levels. Major infrastructure projects include the CHF 2.1 billion Gotthard tunnel extension, railway station expansions in Geneva and Lausanne, and Alpine solar initiatives under the Solar Express program.

Switzerland faces significant trade policy uncertainty due to its substantial trade relationship with the United States. The country maintains a CHF 34.25 billion trade surplus with the US, representing 4.3% of GDP and the largest surplus with any trading partner, making pharmaceutical exports particularly vulnerable to potential tariff measures.

A landmark development occurred in December 2024 when Switzerland and the European Union finalized new trade agreements after years of stalled negotiations. The updated framework includes migration safeguard clauses and limits European Court of Justice powers through neutral arbitration mechanisms, addressing key Swiss sovereignty concerns. The Federal Council plans to divide the agreement into four separate packages for individual referendum votes, though EU acceptance of partial approval remains uncertain.

Switzerland's financial position remains exceptionally strong, with a positive net foreign investment position of 111% of GDP and a current account surplus of 14% of GDP in 2024. Public finances show continued health with small surpluses, though new social expenditures including a 13th monthly pension payment will add CHF 4.1 billion in costs from 2026.

Source: Coface Economic Risk Analysis, March 2025

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