PUBLISHED June 28, 2026
According to the KOF Swiss Economic Institute at ETH Zurich’s Spring 2026 Economic Forecast, Switzerland’s economy is navigating one of its most uncertain environments in years, shaped by the Iran conflict, U.S. trade policy upheaval, and persistently weak global demand. Assuming the conflict’s economic repercussions remain limited, KOF projects real GDP growth of 1.0 percent in 2026 and 1.7 percent in 2027 — a cautious but not catastrophic outlook.
Two Shocks Define the Forecast
The current forecast continues to be overshadowed by high trade-related and geopolitical uncertainty. At the centre of trade policy risks is the reordering of U.S. tariff policy. A ruling by the U.S. Supreme Court replaced the previous country-specific tariffs with an across-the-board tariff of 10%, and a further increase to 15% was announced shortly afterwards. This has reduced the risk for further escalation in U.S. tariff policy, but trade barriers for export-oriented sectors remain high. Alongside this, the Iran war — which erupted in late February — has pushed up oil and gas prices and disrupted the Strait of Hormuz, a key global trade route. KOF’s baseline assumes both shocks will have only limited lasting impact on the Swiss economy.
The Oil Price Scenario: How Bad Could It Get?
KOF goes further than most forecasters by modeling a concrete alternative scenario. In this scenario, oil prices settle at around USD 90 per barrel and remain elevated throughout the forecast period, around 30% above the baseline. While no severe shortages are assumed, persistently higher energy prices would place an additional burden on production, supply chains and household spending. Real GDP growth excluding major sporting events would fall to 0.7% in 2026 and 1.5% in 2027 under the oil price scenario. By the end of 2027, GDP would stand 0.6% below the baseline scenario. Employment growth would also weaken, with around 20,000 fewer full-time equivalent jobs being created.
Domestic Demand Holds Up — Investment Lags Behind
Private consumption remains a key pillar. It has recently been robust and is expected to stay resilient over the forecast period, supported by low inflation and stable wage growth despite a weaker labour market. Government consumption, however, is expected to increase only moderately as the federal government’s planned consolidation measures under the 2027 budget relief package weigh on growth. Investment remains the weak link: high economic policy uncertainty, weak profitability and low capacity utilisation continue to weigh on investment in machinery and equipment. Construction investment is showing early recovery signs, backed by a favorable interest rate environment and rising building permits.
Goods exports have recently been driven primarily by the chemicals and pharmaceuticals sector, while more cyclical industries such as watches, machinery and electronics continue to suffer from weak international demand. The recent tariff relief vis-à-vis the United States has improved the outlook for parts of industry, but this benefit is partly offset by heightened geopolitical uncertainty. Overall, KOF expects export growth to remain moderate, with imports likely to grow faster than exports — meaning net trade will contribute only marginally to GDP growth
Goods exports have recently been driven primarily by the chemicals and pharmaceuticals sector, while more cyclical industries such as watches, machinery and electronics continue to suffer from weak international demand. The recent tariff relief vis-à-vis the United States has improved the outlook for parts of industry, but this benefit is partly offset by heightened geopolitical uncertainty. Overall, KOF expects export growth to remain moderate, with imports likely to grow faster than exports — meaning net trade will contribute only marginally to GDP growth.
The Swiss labour market remained subdued in 2025, but showed initial signs of stabilisation towards the end of the year. After a weak 2025, employment is expected to return to moderate growth during 2026. At the same time, the unemployment rate is likely to edge up until mid-2026 before easing somewhat thereafter. Real wages are expected to continue rising over the forecast period. The picture is one of a labor market that has avoided a sharp deterioration, but is not yet in a position to generate the kind of hiring momentum that would meaningfully lift domestic demand.
Inflationary pressure remains low overall. Headline inflation has hovered just above zero for some time, and core inflation is also at a very low level. Rents and domestic services remain the main drivers, while domestic goods and imports continue to exert downward pressure. The appreciation of the Swiss franc is adding further disinflationary pressure. KOF therefore expects the Swiss National Bank to keep its policy rate at 0% throughout the forecast period. This positions Switzerland as a notable outlier in a European landscape where central banks are navigating rate hikes driven by energy-induced inflation.
Risks to the forecast remain substantial and are tilted predominantly to the downside. Pressure from the U.S. government to lower pharmaceutical prices could weigh heavily on Switzerland’s pharmaceutical industry. Internationally, the U.S.–Israeli war against Iran raises the risk of persistently high oil and gas prices and further disruption to global supply chains. Any additional conflict-driven appreciation of the Swiss franc would further undermine the competitiveness of Swiss exporters. On the upside, an easing of geopolitical and trade tensions, stronger productivity gains from AI, and more effective fiscal stimulus in Europe all represent scenarios that could push growth above the baseline
The Swiss labour market remained subdued in 2025, but showed initial signs of stabilisation towards the end of the year. After a weak 2025, employment is expected to return to moderate growth during 2026. At the same time, the unemployment rate is likely to edge up until mid-2026 before easing somewhat thereafter. Real wages are expected to continue rising over the forecast period. The picture is one of a labor market that has avoided a sharp deterioration, but is not yet in a position to generate the kind of hiring momentum that would meaningfully lift domestic demand.
Inflationary pressure remains low overall. Headline inflation has hovered just above zero for some time, and core inflation is also at a very low level. Rents and domestic services remain the main drivers, while domestic goods and imports continue to exert downward pressure. The appreciation of the Swiss franc is adding further disinflationary pressure. KOF therefore expects the Swiss National Bank to keep its policy rate at 0% throughout the forecast period. This positions Switzerland as a notable outlier in a European landscape where central banks are navigating rate hikes driven by energy-induced inflation.
Risks to the forecast remain substantial and are tilted predominantly to the downside. Pressure from the U.S. government to lower pharmaceutical prices could weigh heavily on Switzerland’s pharmaceutical industry. Internationally, the U.S.–Israeli war against Iran raises the risk of persistently high oil and gas prices and further disruption to global supply chains. Any additional conflict-driven appreciation of the Swiss franc would further undermine the competitiveness of Swiss exporters. On the upside, an easing of geopolitical and trade tensions, stronger productivity gains from AI, and more effective fiscal stimulus in Europe all represent scenarios that could push growth above the baseline
