What will happen to the Swiss economy in 2024?
If you are wondering what lies ahead for Switzerland — and you —in 2024, here are some answers.
Some of the things we have been complaining about in 2023 — like inflation, higher rents, and other general costs — are likely to spill over to the new year as well.
Let’s look at some key forecasts for Switzerland's economy for 2024.
Inflation
From the current rate of 1.7 percent, the inflation is expected to increase slightly to 1.9 percent at the beginning of next year.
But even with this very slight hike, Switzerland will still do better, in terms of inflation, than other European countries: the EU forecasts the rate of 3.2 percent in 2024.
READ ALSO: How is Switzerland managing to keep inflation so low?
What about wages?
There has been an ongoing debate in Switzerland about whether the announced pay increases will be enough to offset the inflation-driven cost of living.
The answer to this question comes from a new UBS Compensation Survey, which found that “while the majority of Swiss companies are granting wage increases of 1.9 percent in 2024 to compensate for rising prices, few are surpassing the rate of inflation."
In fact, most salaries (except perhaps the highest ones) are not compensating for the cost of living, which will soar next year with a sharp increase in both health insurance premiums and electricity prices.
Health insurance rates will go up by 8.7 percent on average, while electricity tariffs will increase by 18 percent.
And then there are rents…
The vast majority of Switzerland’s population are tenants.
After seeing their rents increase by 3 percent in October, they will go up by another 3 percent in April, after the Federal Housing Office announced that it is raising the reference mortgage rate, which is used to determine rents, from 1.50 to 1.75 percent.
This means that if your rental contract is based on the reference rate, your rent will go up.
About 54 percent of rental contracts in Switzerland are based on the reference rate.
Regionally, however, even a larger number of rentals are affected.
In the Zurich area, as well as in central Switzerland, for instance, more than 60 percent of rental contracts are based on a reference rate.
In the Bern region, as well as in northwestern parts of the country, that proportion is just over 53 percent, while in the western and southern cantons (which include Geneva and Vaud), less than half of rental contracts are tied to the reference rate.
READ ALSO : Switzerland sees new rent hike but will yours go up
Is there any good news for 2024?
If you are a property owner without a fixed-rate mortgage, or are looking to purchase a house, then yes.
According to UBS, “10-year fixed-rate mortgages currently cost between 2.5 and 3.0 percent in most cases. Over the course of the year [2024], we expect these rates to fall slightly to around 2.2 to 2.7 percent.”
And there is more positive news as well: “Despite the loss of purchasing power, UBS economists expect high immigration, a robust labour market and excess savings to support consumption in Switzerland in 2024," the report noted.
"A large number of households will likely draw on savings to cushion the burden of higher healthcare premiums, as well as rising rents and higher electricity prices. Although lower-income groups have little or no savings, their wages are expected to increase above average," according to the UBS Compensation Survey.
Comments
See Also
Some of the things we have been complaining about in 2023 — like inflation, higher rents, and other general costs — are likely to spill over to the new year as well.
Let’s look at some key forecasts for Switzerland's economy for 2024.
Inflation
From the current rate of 1.7 percent, the inflation is expected to increase slightly to 1.9 percent at the beginning of next year.
But even with this very slight hike, Switzerland will still do better, in terms of inflation, than other European countries: the EU forecasts the rate of 3.2 percent in 2024.
READ ALSO: How is Switzerland managing to keep inflation so low?
What about wages?
There has been an ongoing debate in Switzerland about whether the announced pay increases will be enough to offset the inflation-driven cost of living.
The answer to this question comes from a new UBS Compensation Survey, which found that “while the majority of Swiss companies are granting wage increases of 1.9 percent in 2024 to compensate for rising prices, few are surpassing the rate of inflation."
In fact, most salaries (except perhaps the highest ones) are not compensating for the cost of living, which will soar next year with a sharp increase in both health insurance premiums and electricity prices.
Health insurance rates will go up by 8.7 percent on average, while electricity tariffs will increase by 18 percent.
And then there are rents…
The vast majority of Switzerland’s population are tenants.
After seeing their rents increase by 3 percent in October, they will go up by another 3 percent in April, after the Federal Housing Office announced that it is raising the reference mortgage rate, which is used to determine rents, from 1.50 to 1.75 percent.
This means that if your rental contract is based on the reference rate, your rent will go up.
About 54 percent of rental contracts in Switzerland are based on the reference rate.
Regionally, however, even a larger number of rentals are affected.
In the Zurich area, as well as in central Switzerland, for instance, more than 60 percent of rental contracts are based on a reference rate.
In the Bern region, as well as in northwestern parts of the country, that proportion is just over 53 percent, while in the western and southern cantons (which include Geneva and Vaud), less than half of rental contracts are tied to the reference rate.
READ ALSO : Switzerland sees new rent hike but will yours go up
Is there any good news for 2024?
If you are a property owner without a fixed-rate mortgage, or are looking to purchase a house, then yes.
According to UBS, “10-year fixed-rate mortgages currently cost between 2.5 and 3.0 percent in most cases. Over the course of the year [2024], we expect these rates to fall slightly to around 2.2 to 2.7 percent.”
And there is more positive news as well: “Despite the loss of purchasing power, UBS economists expect high immigration, a robust labour market and excess savings to support consumption in Switzerland in 2024," the report noted.
"A large number of households will likely draw on savings to cushion the burden of higher healthcare premiums, as well as rising rents and higher electricity prices. Although lower-income groups have little or no savings, their wages are expected to increase above average," according to the UBS Compensation Survey.
Join the conversation in our comments section below. Share your own views and experience and if you have a question or suggestion for our journalists then email us at [email protected].
Please keep comments civil, constructive and on topic – and make sure to read our terms of use before getting involved.
Please log in here to leave a comment.