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KOF Cuts Swiss Economic Growth Projections Amid Conflict-driven Oil Price Shock

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Switzerland's real gross domestic product, adjusted for sporting events, is now expected to grow more softly than previously projected, amid higher oil prices due to the US and Israel's war against Iran, the KOF Swiss Economic Institute said Wednesday.

Forecasts for economic growth were cut to 0.8% from 1% for 2026 and to 1.5% from 1.7% for 2027. At the same time, higher oil prices and travel costs drove KOF's inflation estimate to 0.6% from 0.3% for 2026, keeping the assumption unchanged at 0.6% for the subsequent year. Swiss National Bank (SNBN.SW) is expected to hold the policy rate steady at zero over the entire forecast period, KOF added.

Across the labor market, employment in full-time equivalents is expected to increase by 0.5% in 2026 and 0.7% in 2027. Meanwhile, the unemployment rate in 2026 is projected to rise to 5.1% and 3.1% based on the respective definitions of the International Labour Organization and the State Secretariat for Economic Affairs, and remain high initially in 2027.

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