ZURICH (Reuters) – Switzerland’s budget deficit will likely rise over the next four years, the government said on Thursday, as it increases spending on military equipment and makes efforts to reduce carbon emissions.
An expected annual deficit of 729 million Swiss francs ($856 million) in 2025 will rise to 2.54 billion francs by 2028 as investment spending outpaces the likely increase in government income from taxes.
The higher investment spending “is largely due to the increase in the army budget and the promotion of decarbonisation,” the government said on Thursday.
Neutral Switzerland is upgrading its defences following the Ukraine war, buying new fighter aircraft and missile systems as well as building new data centres to make it less vulnerable to cyber attacks.
Spending on military equipment is expected to increase by an average of 5.4% per year between 2024 and 2028, higher than the increases in other parts of the budget like education and social welfare.
The government is also increasing financial aid for companies to reduce their carbon emissions, as part of the goal of Switzerland becoming climate neutral by 2050.
Spending will also increase on pensions after Switzerland voted for a 13th monthly payment per year in a referendum in March.
Despite the higher budget deficits, Switzerland’s central government debt will still be low by international comparison, reaching 16.6% of GDP by 2028. This compares with 46% level in Germany and 92% in France and far below the 101% level in Britain, according to IMF data.
The government, which has sent the financial plan to parliament to consider, said new measures are needed to establish a structural balance in the national budget.
It has appointed a group of experts to review spending and subsidies, with the results expected in the next few months.
($1 = 0.8520 Swiss francs)
(Reporting by John Revill; Editing by Toby Chopra)