KOF Raises Swiss Growth Forecast for 2026

Swiss GDP growth is now forecast at 1.9% for 2026, more than twice the 0.8% rate KOF economists projected during the summer. The KOF Institute at ETH Zurich announced the upgrade on September 30, 2026, citing a stronger-than-expected first half of the year and, in particular, a surprisingly robust second quarter.

The forecast excludes the impact of international sporting events, providing a cleaner view of underlying economic activity. KOF also raised its outlook for 2027 to 1.7%, from 1.5%, and expects growth of 1.7% in 2028.

The revision gives Swiss companies and policymakers a more constructive near-term outlook after a period of concern over trade restrictions, energy costs and fragile global conditions. Revised national accounts also contributed to the change. According to KOF, the updated data provide a “significantly more favourable picture” of recent economic developments.

The institute has not declared the risks resolved. Its economists continue to monitor US tariff policy, higher energy prices, the conflict in the Middle East and rising bond yields. Those factors could still affect Swiss exporters, investment decisions and household spending as the year progresses.

The second quarter changed the picture for Switzerland’s economy. KOF said output in the first half of 2026 was significantly stronger than expected, with the April to June period delivering the clearest positive surprise. That performance led the institute to reassess the momentum carrying into the rest of the year.

The revision also reflects changes to the national accounts. Statistical updates altered the reading of recent activity and showed that the economy had been performing better than earlier estimates suggested. For businesses, the significance lies in the breadth of the improvement. A stronger base entering the second half makes the annual growth target more achievable, even if momentum moderates later.

KOF’s assessment remains tied to the resilience of the wider global economy. Its report says international activity has held up despite pressure from US tariff policy and higher energy prices. Switzerland, with its export-oriented industries and close links to global markets, remains exposed to changes in external demand and trade conditions.

The new figures therefore mark a substantial improvement in the forecast, rather than a guarantee of uninterrupted expansion. KOF’s 1.7% growth projections for both 2027 and 2028 suggest continued expansion, with the path dependent on international conditions.

KOF now expects employment to grow by 1.5% in 2026, a sharp increase from its previous estimate of 0.5%. The revised jobs outlook follows the stronger economic data and the institute’s more positive reading of the second quarter.

The labour market, however, is sending mixed signals. KOF still expects the average unemployment rate to reach 3.1% in 2026, with the same rate forecast for 2027 under the definition used by the State Secretariat for Economic Affairs, or SECO. The combination of job creation and elevated unemployment indicates that the recovery may not benefit all workers equally or at the same pace.

KOF economists said part of the recent rise in unemployment could be structural. They pointed to the increased use of artificial intelligence as one factor reshaping demand for labour. Structural unemployment can persist even when the economy expands, particularly when workers’ skills no longer match the roles employers are seeking.

That tension will matter across Switzerland’s labour market. Stronger GDP growth may support hiring in sectors benefiting from renewed demand, while technological change continues to put pressure on some occupations. The forecast points to more jobs overall, alongside a continuing need for workers to adapt to changing requirements.

Four risks continue to shape Switzerland’s economic outlook: US tariffs, energy prices, Middle East instability and rising bond yields. KOF’s revised forecast rests on the assumption that the global economy can remain resilient under those pressures. A deterioration in any of them could weaken the expansion behind the institute’s new numbers.

US trade policy is especially important for an economy whose companies depend heavily on international markets. New or higher tariffs could raise costs, limit demand for Swiss exports and complicate investment planning. Energy prices carry a similar transmission effect, influencing production expenses, transport and household budgets.

The Middle East adds geopolitical uncertainty, while higher bond yields can increase financing costs for companies, property buyers and governments. These pressures do not automatically overturn the forecast, but they narrow the margin for error around the 1.9% 2026 growth projection.

For Swiss policymakers, the data provide room to assess the recovery with greater confidence while keeping contingency plans in place. For businesses, the message is more selective. Domestic momentum has improved, yet external shocks remain capable of changing conditions quickly. KOF’s outlook for 1.7% annual growth in 2027 and 2028 offers direction, but not certainty.

KOF’s revised figures give Switzerland a stronger starting point for the next two years. The institute expects GDP to expand by 1.7% in 2027 and 1.7% in 2028, while employment growth in 2026 is now projected at 1.5%. Those estimates point to sustained, moderate expansion rather than a short-lived quarterly rebound.

The immediate test will be whether the strength recorded in the first half of 2026 continues through the rest of the year. The upgraded national accounts have already changed the baseline, and the stronger second quarter has improved the arithmetic behind the annual forecast. Companies will still need to navigate trade policy, energy costs and financing conditions.

Workers face a separate challenge. Even with more hiring, KOF expects unemployment to average 3.1% in both 2026 and 2027. The institute’s warning about structural unemployment and artificial intelligence suggests that economic growth alone will not settle every labour market problem.

Switzerland enters the next forecast period with better momentum than KOF anticipated in the summer. The economy’s performance will now be measured against a higher bar, while international policy decisions remain decisive for exporters, employers and households.