Switzerland trims 2026 economic growth forecast on Middle East uncertainty

By John Revill

March 18 (Reuters) - The Swiss government lowered its 2026 economic growth forecast to 1% on Wednesday, citing uncertainty and higher energy prices stemming from the conflict in the Middle East.

Its previous forecast in December had been for 1.1% growth this year.

Citing higher oil prices caused by the U.S.-Israeli war on Iran, an expert group at the State Secretariat for Economic Affairs also doubled its 2026 inflation forecast to 0.4% from 0.2% in December.

"The longer the conflict continues and energy prices remain elevated, the more impact it will have on the economy," SECO economist Felicitas Kemeny said.

"An extended period of disruption could also affect logistics costs, and food prices if fertilisers for example become more expensive."

That would further reduce economic growth as companies cut back investments and if worried consumers reduced their spending, she added.

SWISS WATCHMAKERS ARE EXPOSED

Among Swiss manufacturers, the country's watchmakers are among those most exposed to upheaval in the Middle East as the United Arab Emirates is their sixth biggest market. In addition, Saudi Arabia, Qatar, and Bahrain are significant buyers.

Also on Wednesday, Swiss watch manufacturer Swatch UHR.S, the owner of Omega, Tissot and Longines watches, highlighted political and economic challenges after a difficult 2025.

In the company's annual report, Chair Nayla Hayek said last year was "fraught with tensions and extremes, not least due to the seemingly endless discussions and irrational decisions surrounding tariffs".

Without mentioning specific countries, she referred to an "uncertain and sometimes schizophrenic world, where the self-interest of the strongest prevails at the expense of the collective interest" and said that political and economic challenges will continue this year.

The country's SECO expert group also cited ongoing uncertainty, but for 2027 kept its forecast for Swiss economic growth at 1.7%, still below the long-term average Swiss growth rate of 1.8%.

It also projected slightly weaker private consumption.

Inflation in 2027 is expected to increase to 0.5%, SECO said, maintaining its previous forecast.