Switzerland’s Economy Begins to Emerge from Downturn

The Shock from US Tariffs Was the Largest Since the Pandemic

Switzerland’s economy returned to growth at the end of 2025 after its sharpest contraction since the pandemic. In October–December, gross domestic product increased by 0.2% compared with the previous three months, when it had declined by 0.5%. The result came in slightly below analysts’ expectations, Bloomberg reported, citing the State Secretariat for Economic Affairs.

Swiss GDP: Cautious Stabilization

The quarterly increase marked a technical turnaround following the third-quarter decline. That contraction coincided with the introduction of a 39% US tariff and was the most significant since the pandemic. The consensus forecast had pointed to a 0.3% expansion, underscoring the restrained nature of the recovery.

SECO noted that the services sector showed moderate momentum, while industry effectively stagnated. This suggests that the rebound remains limited in scope and is driven by a narrow set of factors.

In mid-November, tariffs were reduced to 15%, partially stabilizing the external environment. The government subsequently revised its growth projections closer to the levels expected before the surcharges were introduced, while emphasizing that uncertainty remains elevated. For 2025 as a whole, the economy expanded by 1.4%, in line with the official estimate.

Exports, Pharmaceuticals and the Labor Market

Switzerland’s export-driven model is also facing currency-related pressure. The Swiss franc has climbed to decade highs against the euro and the dollar, eroding price competitiveness abroad. Against this backdrop, policymakers are discussing the possibility of returning to negative interest rates after cutting the benchmark rate to zero. Such a move could ease the impact of a strong currency but would also pose risks for the financial system.

The third quarter marked only the second period of economic contraction since the pandemic, highlighting the country’s relative resilience. At the same time, signs of cooling activity are becoming more visible. Job cuts are primarily affecting the pharmaceutical sector, a key pillar of exports. Additional pressure stems from US policies aimed at lowering drug prices.

Small and medium-sized enterprises, which employ roughly two-thirds of the workforce, are also revising plans and considering relocating part of their production abroad. Unemployment has been gradually rising since 2023, although the seasonally adjusted rate edged down slightly in January.

Outlook for the Coming Years

The expert group at the State Secretariat for Economic Affairs expects growth of 1.1% in 2026 after 1.4% in 2025. The forecast has been revised upward from the previous estimate, but the pace will remain below the long-term average. The baseline scenario assumes that current trade conditions will persist and that external demand will recover gradually. Growth is projected to accelerate to 1.7% in 2027, provided the global economy continues to improve.

Analysts at International Investment note that fourth-quarter data confirm the Swiss economy’s ability to adapt to external trade restrictions. However, the current expansion remains limited and has yet to generate a sustained industrial upswing. Pressure from the exchange rate and US pharmaceutical pricing policy is increasing dependence on the external environment. In the coming years, economic performance will largely hinge on global trade dynamics and monetary policy decisions. If external risks persist, Switzerland may settle into a pattern of moderate but uneven growth.