European Economic Outlook: growing risks to Europe’s economy – Switzerland comparatively resilient

• KPMG’s latest European Economic Outlook shows that the renewed energy price shock is increasing pressure on growth, inflation and supply chains across Europe.

• The direct impact on Switzerland is likely to be more limited than in economies with greater dependence on gas.

• Risks remain high for export-oriented Swiss companies, particularly with regard to demand, investment and global supply chains.

KPMG’s latest European Economic Outlook shows that the renewed energy price shock is weighing on Europe’s economy. KPMG expects the European economy to grow by 0.9% in 2026 and by 1.2% in 2027. The direct impact on Switzerland is likely to be more limited than in economies with greater dependence on gas.

According to Yael Selfin, Chief Economist at KPMG UK, the current crisis differs materially from the one at the beginning of 2022. “Direct gas exposure is lower than during the Russia-Ukraine energy crisis, reducing the risk of physical shortages. However, the broader impact on global commodities and supply chains means the economic effects could prove more widespread.”

How far Europe’s economy comes under pressure will depend largely on the duration and severity of the current disruption. If the situation eases quickly over the summer, the overall economic impact is likely to remain limited. At the same time, higher transportation costs and rising input prices are increasing pressure on businesses and supply chains across Europe. Disruptions to commodities such as aluminium and helium are already affecting industrial supply chains and adding to cost pressures in key sectors including automotive manufacturing, semiconductors and defence production.

Europe’s inflation is forecast to average 3.1% in 2026, driven primarily by rising energy prices and higher transportation costs. The extent to which this development feeds through to individual countries will depend on their energy exposure and the structure of their electricity markets. While economies with greater dependence on gas, such as Italy and Ireland, are likely to be more affected, Switzerland is expected to see a more limited pass-through of rising prices. Compared with the rest of Europe, this points to a more resilient starting position, even if the Swiss market cannot fully escape international price and demand effects.

Despite the renewed pressure on household purchasing power, consumer spending is expected to remain a key driver of growth in Europe. Although rising prices are weighing on real incomes and consumer sentiment has weakened, labour markets across much of Europe remain resilient. This is relevant for Switzerland, as weaker consumer momentum in Europe could indirectly weigh on its export-oriented economy. Overall, however, resilient labour markets are expected to support household spending and help cushion part of the external risks. Europe’s further economic development will remain highly relevant for Switzerland, particularly for export-oriented and internationally connected businesses.