Economic trends, autumn 2025
Every quarter, the Federal Government’s Expert Group publishes a
The autumn forecast was presented on 16 October 2025 with a SECO
In this advanced text with exercises, Iconomix presents a concise summary on the basis of excerpts from the SECO press release and the 26-page SECO publication. It then sets a number of questions on the text. Questions marked with the ✪ icon are advanced questions that go beyond the SECO text and encourage further thought.
As a small economy geared to the global markets, Switzerland is heavily influenced by international economic developments. For this reason, the summary starts with an outline of the global economic situation and the monetary environment. The second section looks into the economic situation in Switzerland in the second quarter of 2025. The third part presents the latest economic forecast for 2025 and 2026, while the fourth explains the risks to economic developments and the forecast.
Slide set with charts and tables
The Iconomix ‘Economic trends’ unit also includes a PDF slide set (in German only) containing all the charts and tables from the corresponding SECO publication, covering areas such as the contribution made by final domestic demand to GDP growth, global trade and inflation trends.
Real economy
Global economic expansion was stronger than expected in the second quarter of 2025. Following relatively brisk growth in the first quarter – driven by front-loading effects in anticipation of tariff increases in the US – a significant slowdown had been expected for the second quarter. In many countries, this slowdown was less pronounced than forecast.
China, the UK and Japan recorded robust growth in the second quarter. Despite a slight drop in GDP in Germany and Italy, the euro area as a whole also saw modest expansion. In the US, growth in the second quarter was strong due to declining imports, after GDP had contracted slightly in the first quarter as a result of a sharp rise in imports.
Monetary developments
Inflation has recently been edging up again in many countries, partly owing to higher oil prices. By contrast, core inflation (excluding volatile components such as energy and fresh food) remains at levels that are well above average in some cases. In several countries, it has even risen again lately.
The current cycle of interest rate cuts in the euro area and Switzerland has likely come to an end for the time being. From Switzerland’s perspective, the high level of global debt has further increased the interest rate differential. Since the announcement of the new tariffs for Switzerland, upward pressure on the Swiss franc has eased somewhat.
Exercises on the international and monetary environment
Briefly describe how the global economy developed in the second quarter of 2025. Comment on the different developments in the various economic areas.
Briefly describe monetary developments since July 2025.
✪ In the text, reference is made to front-loading effects, also known as anticipation effects. Explain what the term means and describe how these effects can influence the economy in the short term. In your answer, discuss the trigger for these front-loading effects mentioned in the text.
✪ The SECO text states that the high level of global debt has further increased the interest rate differential from Switzerland’s perspective. How are rising international debt levels and interest rates around the world linked? Explain.
Gross domestic product
In the second quarter of 2025, the Swiss economy expanded only slightly, at 0.2%. The strong growth of the previous quarter (up 0.8%) was followed, as expected, by a countermovement in the second quarter.
In manufacturing, value added and goods exports decreased. The chemicals/pharmaceuticals industry, in particular, recorded a drop in value added as a result of declining exports. This came after an increase in the first quarter, which had been driven by front-loading effects in connection with US trade policy. In addition, value added in other manufacturing industries fell slightly in the second quarter, as in the previous quarter.
On the expenditure side, domestic final demand – i.e. household and government consumption as well as investment – developed slightly positively overall in the second quarter. This helped stabilise the economy in Switzerland. A closer look reveals a mixed picture: Although consumption by households and the government was up, investment decreased.
Labour market
The unemployment rate remained at 2.9% in August 2025, slightly above the cyclically neutral level.
Inflation
After being slightly negative in May (−0.1%), inflation picked up again and stabilised in the low positive range (August: 0.2%). Energy sources (electricity, oil) in particular continue to contribute negatively to inflation.
Exercises on the economic situation in Switzerland
Describe how the Swiss economy developed in the second quarter of 2025.
Briefly describe the situation on the Swiss labour market.
Briefly explain how inflation has developed since May 2025.
✪ Since 7 August 2025, imports from Switzerland have been subject to an additional US tariff of 39%, instead of the previous 10%, with certain exceptions. These additional tariffs are extremely challenging for the sectors and exporters that are directly affected. Why is that? Explain.
✪ In the SECO text, reference is made to the cyclically neutral level of the unemployment rate. What is meant by this? Explain.
Gross domestic product
Given the currently challenging trade policy environment, Switzerland is expected to experience very weak economic expansion in the second half of 2025. A ‘technical recession’, i.e. two consecutive quarters of negative GDP growth, is conceivable.
For 2025 as a whole, the Expert Group has confirmed its previous forecast of 1.3%. While GDP growth in the second half of the year is likely to be weaker than expected due to the new higher US tariffs, the corresponding figure for the first half of the year has been revised slightly upwards.
The Expert Group has significantly lowered its forecast for 2026. It now expects growth for the Swiss economy to be well below average, at 0.9% (June forecast: 1.2%). The base effect resulting from a weak second half of 2025 is also contributing to this forecast revision.
Labour market
The subdued economic growth is also having an impact on the labour market. The unemployment rate is expected to rise to 3.2% in 2026, up from 2.9% in 2025 (unchanged forecasts).
Inflation
The Expert Group has raised its forecast for average annual inflation in 2025 slightly, to 0.2% (June forecast: 0.1%). Inflation is expected to return to average levels of around 0.5% in 2026 (unchanged from the June forecast).
Exercises on the economic forecast for Switzerland
Describe briefly what GDP growth the Federal Government’s Expert Group is expecting for 2025 and 2026.
Briefly summarise what unemployment rate can be expected in the forecast period.
Describe in a few words how inflation is likely to develop over the forecast period.
✪ The outlook for the Swiss economy has deteriorated due to considerably higher US tariffs. The tariffs are likely to dampen exports and investment especially. How will higher US tariffs affect Swiss exports and investments? Explain.
✪ The SECO text states that the ‘base effect’ also contributes to the forecast revision. What is meant by this? Explain.
Risk of a trade war
Uncertainty surrounding international economic and trade policy and their macroeconomic impact is still high, for example due to the sectoral tariffs announced by the US and the EU, which would further slow foreign trade. Conversely, if Switzerland reaches an agreement with the US or if international trade policy eases, a more favourable development could be expected.
Overall, however, downside risks to the economy currently prevail. The possibility of a deterioration in the international environment cannot be ruled out.
Risk of financial market corrections
The risk of corrections in the financial markets continues to be high. The risks associated with global debt, particularly sovereign debt, have become even more significant. Moreover, there are still balance sheet risks at financial institutions and risks in the real estate markets.
Geopolitical risks
Geopolitical risks also remain, particularly in connection with the armed conflicts in Ukraine and the Middle East.
If various risks were to materialise, continued upward pressure on the Swiss franc would have to be expected.
Exercises on the economic risks
Any economic forecast is subject to a certain degree of uncertainty. Name major downside risks mentioned in the text.
The SECO text also mentions upside risks. Which ones?
✪ In times of international crisis, investors seek safe investments, and the Swiss franc is regarded worldwide as a trusted currency due to Switzerland’s political and economic stability. Explain how international tensions influence demand for the Swiss franc and how this affects its exchange rate.
