For real gross domestic product (GDP) excluding major international sports events, KOF now expects growth of 1.9 percent. In its summer forecast, it had still forecast 0.8 percent. The institute projects growth of 1.7 percent for both 2027 and 2028.

The development was driven primarily by strong goods exports, especially pharmaceuticals. Private consumption as well as construction and equipment investment also supported the economy. For the third quarter, however, KOF expects a temporary pause in growth before the economy is likely to accelerate moderately again in the fourth quarter.

Inflation remains low

Inflation is likely to remain low despite higher energy prices. KOF expects inflation of 0.6 percent in both 2026 and 2027, and 0.5 percent in 2028.

The Swiss National Bank (SNB) left its policy rate unchanged at zero percent in September. KOF expects a 25-basis-point increase at the next monetary policy assessment in December. After that, the policy rate is likely to remain unchanged through 2028.

Investment and consumption support growth

According to KOF, investment is developing better than previously assumed. Gross fixed capital formation is expected to grow by 1.3 percent in 2026 and by 2.7 percent in 2027. Construction investment in particular is likely to continue rising.

Private consumption also remains an important pillar of domestic demand. Improved consumer sentiment, rising retail sales and higher disposable incomes point, according to KOF, to a sustained recovery.

Export economy caught between recovery and US tariffs

The improved outlook in Europe is likely to support Swiss foreign trade. In particular, the machinery and electrical engineering industry is showing signs of stabilization, according to KOF, while the pharmaceutical industry continues to provide important growth impulses.

At the same time, US tariffs and weak demand in certain sales markets remain headwinds for the export-oriented Swiss economy.

Labour market recovers only partially

The outlook for the labour market is also more favorable. KOF expects employment growth in full-time equivalents of 1.5 percent in 2026, after previously forecasting 0.5 percent.

Nevertheless, unemployment is likely to remain elevated. For 2026 and 2027, the institute expects an average unemployment rate of 3.1 percent in each year. In 2028, it is expected to edge down to 3.0 percent.

High risks

Despite the improved outlook, uncertainty remains high. KOF cites a further escalation in the Middle East, additional US tariffs and weaker demand in key export markets as central risks. Rising financing costs as a result of problems in highly indebted countries could also weigh on the global economy.

On the other hand, easing trade conflicts, additional European investment and faster adoption of artificial intelligence could provide a stronger boost to the Swiss economy than is currently expected.