According to a new study by UBS, the rate of inflation in Switzerland is set to fall back down to manageable levels in the next year. The Swiss bank argued that as the cost of energy declines and the supply chain stabilises, Switzerland’s economy will bounce back quicker than its European neighbours.

Inflation to slow in Switzerland in 2023

In their latest forecast, published by Le Matin, UBS economists predicted that "inflationary pressure [in Switzerland] should ease significantly as energy prices stabilise and supply chains normalise.” They predicted that the inflation rate in Switzerland, which reached a near-record high of 3 percent in 2022, will fall to 2 percent in 2023 before dropping to 1,3 percent in 2024.

When asked why Switzerland’s economy is expected to fare better than countries in Europe - the Netherlands, for example, has seen its highest inflation rate in 50 years - the bank attributed the low inflation rate to efforts by the Swiss National Bank (SNB) to maintain a strong Swiss franc, and its decision to raise interest rates.

Interest rate rises inevitable, but Swiss economy will still grow

Despite their positive appraisal, UBS predicted that the SNB will have to raise interest rates again to 1,5 percent in March 2023. There may also have to be austerity measures in Switzerland as, after posting a 132-billion-franc loss in 2022, the SNB will likely not transfer as much money back to the government and cantons as usual. However, this will likely only last until 2027, when UBS predicts the SNB will make a healthy profit of 40 billion francs a year.

The positive report continued into the bank’s assessment of the economy as a whole, with experts predicting that gross domestic product will grow by around 0,7 percent in 2023. “The [global] economic slowdown should also make the Swiss franc attractive this year,” UBS added, predicting that by the end of the year, the franc will, once again, become more valuable than the euro, and a lot more valuable than the US dollar.

Shortage of workers remains primary threat to the economy in Switzerland

It wasn’t all sunshine and roses, though: the bank said the country’s main challenge in the future will be the shortage of labour in Switzerland. “By 2030, a labour shortage of 220.000 to 250.000 people is to be expected,” they noted, concluding that the country must find a way to “integrate older workers and mothers more into working life” if Swiss social security is to survive as it is today.

While the economy will improve, prices in the Swiss housing market will stabilise and even begin to fall: UBS concluded that the cost of renting a house and apartment will not rise as much as in 2022, to the point that when adjusted for inflation, prices will fall by between 1 and 0,5 percent in 2023.

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