Switzerland cuts 2025 economic outlook as trade war risks weigh

The Swiss government has lowered its economic growth forecasts for 2025 and 2026 to 1.3% and 1.2% respectively, down from previous estimates of 1.4% and 1.6%, due to anticipated impacts from the global trade war on its export-oriented economy. The State Secretariat for Economic Affairs (SECO) cited high uncertainty regarding international trade and economic policy as key factors influencing the downgrade, despite strong initial growth in the year driven by exporters accelerating shipments ahead of U.S. tariffs.

Analysis

The Swiss government has revised its economic growth forecasts downwards for both 2025 and 2026, signaling concerns over the impact of global trade tensions on its heavily export-oriented economy. The State Secretariat for Economic Affairs (SECO) now projects GDP growth of 1.3% for 2025, a reduction from the 1.4% forecasted in March, and 1.2% for 2026, down from 1.6%. Both revised figures, adjusted for sporting events, notably fall below Switzerland's long-term average growth rate of 1.8%. SECO attributes this dimmer outlook to persistent high uncertainty in international trade and economic policy, which is expected to lead to a fall in exports. Despite a strong start to the current year, driven by exporters accelerating shipments ahead of anticipated U.S. tariffs, SECO anticipates a significant weakening in economic performance for the remainder of the year, reflecting the vulnerability of the Swiss economy to external trade dynamics.

Key Decisions for Investors

• Investors should consider adopting a more cautious stance towards Swiss assets, particularly those with significant exposure to the export sector, given the government's downgraded growth forecasts stemming from global trade war concerns.
• It is advisable to closely monitor upcoming Swiss economic indicators, especially export figures and business sentiment surveys, alongside global trade policy developments, to assess the materialization of these revised, lower expectations.
• A re-evaluation of portfolio allocations to Swiss franc-denominated assets and specific Swiss equities, notably in export-driven industries, may be warranted in light of the anticipated economic slowdown and projected decline in exports.