Swiss recession unlikely, says leading economist

KOF director Jan-Egbert Sturm says the world is going through an unprecedented cycle, but he remains optimistic. © Keystone / Ennio Leanza

Swiss growth will slow this winter, but a recession is unlikely, says Jan-Egbert Sturm, director of the Swiss Economic Institute (KOF) at Federal Institute ETH Zurich.

“The foreseeable recession in Germany and also in other large European countries like France, Italy and Spain will indeed dampen our growth,” he said in an interview with the Sonntagszeitung newspaper published on Sunday. “We will probably have pretty weak growth over the winter half-year. But assuming energy shortages in the coming winter months are not disastrous, I rule out a recession in Switzerland.”

Asked about the current phase that the world is facing, he said it was unique. “Pandemic, Ukraine war, energy crisis, interest rate turnaround, fears of recession, very high inflation in many countries — these are unique developments,” he said. “As an economic researcher, this is very exciting and shows that the world is no longer the way it used to be. But of course, I would also prefer easier times.”

Despite high inflation elsewhere, he expects it to remain between 3 and 3.5% in Switzerland until spring, he told the paper. The inflation rate should then fall, he says, “unless new unexpected problems arise”.

This is despite current wage demands in Switzerland, where labour unions are demanding pay rises of 4-5% and employers say this is not possible because of the expected downturn. Sturm told the paper that he understands the arguments on both sides, but that a compromise must be found. “On the one hand, inflation is unexpectedly high, and some compensation for this is necessary,” he said. “On the other hand, we have to be careful not to create a wage-price spiral. I am optimistic that – as is usual in Switzerland – a happy medium will be found.”