BofA Chief Economist: «Switzerland Doesn’t Need to Grow by 5 Percent»
His schedule is packed. First Geneva, then Zurich, one meeting after another.
Claudio Irigoyen cannot complain about a lack of demand.
Irigoyen is Head of Global Economics Research at BofA Global Research. In this role, he oversees the global economics research team, coordinates worldwide economic forecasts and analyses developments in the global economy. Before moving into the banking sector, he spent five years as Chief Economist and Director of Monetary Policy at the Central Bank of Argentina. He is regarded as one of the leading economists in his field and regularly ranks at the top of Institutional Investor surveys.
The Maturity of Market Participants
Irigoyen sees the global economy entering a new geopolitical phase. He does not view Donald Trump’s presidency as the cause, but rather as a catalyst for trends that were already underway. «Markets react less and less to political headlines,» Irigoyen says in his meeting with finews. Much of what happens today is immediately absorbed by expectations of central bank responses — from the US Treasury’s issuance strategy to potential quantitative easing (QE) signals. The paradoxical result is lower volatility despite louder geopolitical noise. «This points to a growing maturity among market participants,» he emphasises.
Despite political and geopolitical uncertainty, Irigoyen expects the global economy to grow by 3,4 percent this year. This growth is driven primarily by what he considers the two most important engines: the US and China. «We are more optimistic than the market consensus on both and forecast average growth of 2,8 percent and 4,7 percent respectively,» he adds.
What Really Matters in the Race Between Powers
Irigoyen also points out that the tectonic shift between the US and China began more than a decade ago. «The logic is based on a bipartisan consensus. The US views China as a potential threat to its interests,» he says. What matters today is no longer tariff policy, but global access to critical inputs such as rare earths, raw materials and semiconductors. The race is clear: whoever is first to achieve autonomous, microchip-based value creation will enjoy a strategic advantage in the event of conflict.
China, meanwhile, continues to export deflation in the form of inexpensive goods to other regions. «This creates political pressure and could lead to more protectionist measures, including in Europe. But tariffs do not solve Europe’s structural problems. These run deeper and require political reform,» Irigoyen says.
Europe: Too Much Reaction, Too Little Reform
Irigoyen’s assessment of the European economy is particularly blunt. The era of cheap Russian gas is over, while viable alternative strategies remain insufficiently developed. Europe is also lagging behind in defence, digitalisation and artificial intelligence (AI). «The AI revolution is happening in the US and China. Europe has innovation, but regulation makes it difficult for companies to be founded and to grow,» Irigoyen says.
Quick fixes will not change this. «Productivity gains require reforms that are politically uncomfortable but indispensable in the long term. Preventive measures rarely receive immediate recognition in political practice,» he adds.
While the US economic area, despite its own challenges, continues to act more entrepreneurially, Europe is institutionally more fragmented and suffers from a lack of fiscal integration and limited coordination in industrial policy. «At the latest, the Draghi report showed that there is no lack of insight. The real problem is that no one explains how to create incentives for politicians to implement its recommendations.»
Switzerland’s Luxury Problem
Irigoyen paints a far more optimistic picture of Switzerland. It does not share many of Europe’s structural problems and occupies a unique position due to its currency. «The Swiss franc is one of the few genuine reserve currencies. In a world where trust in fiat currencies is declining, this becomes a strategic asset.» Capital inflows during crises may create appreciation pressure, «but there are worse problems than those arising from too much trust.»
Growth miracles are neither expected nor required. «Switzerland doesn’t need to grow by 5 percent. Mexico needs to grow by 5 percent. Unlike emerging markets, Switzerland can afford to focus on stability and gradual progress.» It also benefits from its independence, though this should not prevent economic cooperation when opportunities arise: «What matters is continuing to promote trade and investment and deploying Switzerland’s strengths in a targeted way.»
AI Bubble? The Rally Is Broader
On the much-debated AI bubble, Irigoyen takes a sober view. Valuation extremes among individual tech companies are undeniable, but the overall phenomenon is not an AI-specific one. «The rally is broader. Stocks in Japan, Europe or Mexico are also trading at record highs — without an AI revolution.»
The root cause lies in excess liquidity that has flowed into developed markets since 2008 rather than into goods prices. This has led to asset price inflation and growing inequality — and has created political incentives for higher government deficits, which in turn are supported by central banks. «The system today is based on the assumption that liquidity will not be withdrawn, because doing so would trigger a recession. Central banks can hardly escape this situation.»
Irigoyen is less concerned about tech valuations than about the rapidly growing private credit market. In his view, tighter regulation of banks is pushing capital into less regulated areas of the financial system. While professional investors are generally better able to absorb losses, he warns that pension funds are being exposed to higher risks. They should not increase their allocation to private credit any further — the risk, he argues, is simply too great.