Fragile Swiss economic growth
Following an encouraging first quarter of 2023, the economic outlook for the second half of the year is becoming gloomier. economiesuisse expects Swiss gross domestic product (GDP) to increase by 0.6 percent overall in 2023. The December forecast therefore remains unchanged.
The Swiss economy is facing ongoing challenges that are affecting the country's growth potential. This is the view of the umbrella business association economiesuisse in its latest analysis based on a survey of companies. Despite some positive developments, economic growth in Switzerland remains fragile and fraught with uncertainty, according to the main finding.
Pharmaceuticals, chemicals and watches as growth drivers
A decisive factor influencing the growth of the Swiss economy is the global economic situation. The increasing trade tensions between the US and other countries as well as the uncertainties related to the Brexit have an impact on Swiss exports. However, in 2022, the Swiss export industry recorded growth of 5.2%, which is encouraging. In particular, the pharmaceutical and chemical industries, the mechanical and electrical engineering industries, and the precision instrument and watch industries contributed to this growth. Strong demand from emerging markets, especially China, also contributed to the increase in exports, according to economiesuisse's evaluation. Nevertheless, any decline in global trade remains a threat to growth.
Strength of the Swiss franc and other structural challenges
Another obstacle to economic growth is the continuing strength of the Swiss franc. In 2021, the franc appreciated by about 8% against the euro, making Swiss exports more expensive. The Swiss National Bank has tried to weaken the franc, and its foreign exchange interventions have helped contain the appreciation. Nevertheless, the strength of the franc remains a challenge to the competitiveness of Swiss companies.
In addition, structural challenges stand in the way of growth. Demographic change and the shortage of skilled workers pose long-term problems. In 2021, a decline of 0.4% in the working population was recorded, which further hampers the availability of skilled labor. This may affect the innovative capacity and productivity of Swiss companies and hamper long-term growth.
Fragile economic growth, but positive developments
Despite these challenges, there are also positive developments that support growth. Investment in research and development is high in Switzerland, amounting to around 3.5% of GDP in 2022. In particular, the technology sector and the life sciences industry have great potential to drive growth. According to economiesuisse, in order to strengthen economic growth, it is still important for Switzerland to increase its competitiveness, for example by further improving education and training, driving forward digitalization and making it easier to set up businesses.
Overall, Swiss economic growth remains a fragile plant, influenced by global developments and internal structural challenges. Geopolitical tensions, especially related to trade, and the long-term impact of the COVID-19 pandemic could continue to affect the growth of the Swiss economy. It is therefore important that Switzerland continues its efforts to diversify export markets and conclude new trade agreements to strengthen its resilience, economiesuisse notes.
Transparency Note: This text was written with support from ChatGPT.
