Economic outlook for 2023: resilience!

In an economic environment marked by uncertainty, most indicators confirm the resilience of the Swiss economy and the world economy as a whole. 2022 will be remembered as the year of rising key interest rates in an attempt to contain inflation. In Switzerland, and in Geneva, inflation is expected to reach 1.0% in 2023, indicating that the peak may already have passed. Businesses are the driving force behind the economic momentum, sustaining an expected GDP growth of 1.3% in Geneva and Switzerland, while consumer sentiment is rather depressed.

Falling inflation

The latest effects of the Covid pandemic and the conflict in Ukraine have led to supply problems and a shortage of energy supplies, causing inflation to rise rapidly. Central bankers on both sides of the Atlantic have drawn on their arsenal of measures, notably higher key interest rates, in a bid to tackle inflation. While the effort seems to be paying off in Switzerland and the US, where the peak of inflation seems to have passed, the situation in the eurozone remains more ambiguous. Further rate hikes in 2023 are likely, although a gradual tapering off can be expected over the coming year. In Switzerland, the moderate rate of inflation is due to the absence of generalised wage indexation, ensuring that the economy is not caught up in a harmful wage-price spiral.


Economy in good shape despite weak consumer sentiment

While the current climate of uncertainty depresses consumer sentiment, economic indicators point towards a generally healthy economy, mainly driven by the corporate sector. Order books are full and companies are continuing their productive investments. Also, most of their exports go to the dollar zone, preserving its competitive advantage thanks to the strengthening of the dollar against other currencies, including the Swiss franc. As for exports to the eurozone, although the appreciation of the Swiss currency against the euro seems to be a handicap, it also offers protection against imported inflation, mainly due to energy prices. Therefore, it should not affect companies that benefit from sufficient margins on their products.

No impact of rising interest rates on the housing market

While the higher interest rates seem to have a positive effect in the fight against inflation, their effect on the housing market is only marginal for the time being. Since most loans are fixed-rate mortgages, their gradual renewal does not cause any alarm in the housing market. The various vacancy rates remain stable, backed by a demographic trend that is still favourable and a price trend that does not yet reflect the impact of rising interest rates. Only construction companies are under some pressure, given they cannot easily carry over the increased material costs to their quotes for construction costs.