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Inflation in Germany fell to 2.2 percent in May. Nevertheless, it is the number one concern for entrepreneurs and is a topic of conversation at this year’s SEF.
In the new SME barometer of the NZZ and the Kaleidos University of Applied Sciences, more than half of the executives surveyed describe inflation as their greatest concern. Also at the Swiss Economic Forum, for example Rolf Nöthiger, member of the board of directors at ANS architects and planners: “Of course we have massive price increases on construction sites. However, it has now receded a bit, but the inflation problem, which we haven’t actually known for years, is now massive again.” Other SEF participants say that products and the services provided are becoming more expensive, and that entire projects are being shelved. For many small and medium-sized companies it is difficult or even impossible to grow in the current situation.
The inflation problem, which we haven’t actually known for years, is now massive again.
Inflation abroad is also worrying
For many entrepreneurs, however, domestic inflation is not the biggest problem, as Peter Spuhler, CEO of Stadler Rail, explains: “Fortunately, we have very moderate inflation in Switzerland of just over 2 percent. But in Central Europe, where we are also active, or in the Baltic states, we have inflation rates of up to 20 percent. That means wages are rising, production is becoming more expensive, and we are losing margins and competitiveness.”
Like most entrepreneurs, Peter Spuhler also hopes that the Swiss National Bank will not raise interest rates any further. But although inflation in Germany fell to 2.2 percent in May, its lowest level since February 2022, further rate hikes by the SNB cannot be ruled out. According to the current inflation forecast, inflation will not remain below 2 percent in the long term, says SNB President Thomas Jordan. “Inflation is stubborn and we need to make sure it stabilizes below 2 percent. Therefore, we cannot rule out that we will have to further tighten monetary policy.”
We cannot rule out having to further tighten monetary policy.
Swiss economy dependent on developments abroad
The starting position for Switzerland compared to other countries is good. Jordan also confirms this. “One can only calculate how big the problems would be for entrepreneurs and households, especially those with low incomes, if we had inflation rates of eight, nine or even 10 percent, as we do abroad.”
The growth of the Swiss economy in the first quarter was better than expected despite the difficult starting position. The SNB’s current forecast for 2023 as a whole is growth of one percent. This is of course moderate growth, not strong, explains Thomas Jordan.
One can only calculate how big the problems would be if we had inflation rates of eight, nine or even 10 percent, as we do abroad.
The reasons for this can be found abroad, among other things. “Switzerland is a small, open economy, demand from abroad plays a very important role, and a slowdown in the international economy, especially in Europe, will of course also have a correspondingly negative impact on Switzerland.”