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Switzerland: economy is bending

Switzerland: economy is bending
Switzerland Panorama


Investors have made it one of their favourite havens during this period of recurrent crises, from global finance to sovereign debt in the eurozone. Proverbial political stability, sound management of public finances, a complex but attractive tax system, many very innovative small businesses and a flexible labour market. Not forgetting, of course, a renowned financial market, making it a major player on the international scene in wealth management activities. These are strengths which sometimes turn into weaknesses.

A very open economy, the Confederation has been faced with a sharp rise in the Swiss franc that only a bold pegging to the euro has been able to curb. Exporters have therefore been able to limit the damage, while reducing their costs and margins. But property has entered a dangerous area and although they are not inevitable, bubble risks cannot be excluded. Even though experts consider that the Swiss franc is still overvalued.

For banks, the main cog of the Swiss economy, times are less straightforward than in the past. The planned disappearance of banking secrecy, new international regulations, lower margins and increased risks of mortgage lending are all challenges. Highly concentrated between UBS and Crédit Suisse, the sector still represents 5 times the national wealth. It was 6.6 times the GDP in 2007.

And despite a strong presence abroad, a refocusing on the domestic market has taken place: assets realized within the Confederation have increased by 20% since 2007.

Nevertheless, this small highly competitive market where the consumer is demanding, with a high purchasing power, remains a test for export candidates. If they can play the quality and precision card to gain the trust of their partners, given a strong tradition of confidentiality, their margins could be substantial. And the country should gradually return to growth after a meagre increase of some 0.7% of GDP in 2012, thanks to increased household consumption.


Diagnosis: the Swiss economy is bending but has not given away

The strengths of the Swiss economy are also its weaknesses. Its political stability, outstanding management of its public finances, its attractive tax regime make it a favourite haven for investors seeking security. This strengthens the Swiss currency to the detriment of exporters and international companies and pushes the property sector into a risk area. The forecasted disappearance of banking secrecy is a source of concern for the financial sector. Consumer confidence is shaken but remains robust. The eurozone crisis has not been resolved; Germany is going through a cyclical trough and activity in emerging countries, growth drivers, will only slightly start again next year. Review of major trends in the Swiss economy, on the eve of a pivotal year.


Jan-Egbert Sturm: «a strength is its adaptability»

The Director of the Swiss Economic Institute thinks that the Swiss economy should gradually recover in 2013. But while the structure of a country, which has a number of very innovative small companies and benefits from a flexible job market, is an asset; exporters have had to reduce their costs and margins to counteract the rise in the Swiss franc – halted by the monetary policy of the Central Bank – and reduced foreign demand.


François Maudet: new challenges for the financial sector

Financial activities are an essential cog of the Swiss economy. They represent 10.5% of GDP, 8.1% of all tax revenue and provide 210,000 jobs. Internationally, they play an important role in wealth management, financing, commodity trading and insurance. The Swiss financial market is dominated by the banking sector, where wealth management is the flagship sector, while insurance assets are relatively modest. Finally, banks face major challenges: regulations and lower margins in wealth management, redefining the «integrated bank» model of UBS and CSG and increased mortgage lending risks in Switzerland.


Philippe Brunel: «the banking sector has shrunk»

Highly concentrated, with UBS representing 30% of the assets and Crédit Suisse 22%, the banking sector remains important to the Swiss economy, even if its size has shrunk to 5 times the national wealth compared to 6.6 times in 2007, emphasises Philippe Brunel. And 82% of people working in this sector are located in the banking Confederation. Does this sector remain at the heart of Swiss national wealth?


Jean-Philippe Keil: taxation is a complex system, under close supervision of the Swiss

The Swiss taxation system is unified at the federal level for taxpayers. The tax deducted and the maximum rate of federal tax are stipulated in the Constitution and can only be modified by a referendum. But the 26 cantons and the communes can decide on their own taxation.


Fabrice Lelouvier: «a test market for exporters»

Swiss consumers are demanding, commensurate with significant purchasing power. But although profit margins are generally large, market penetration costs for a foreign company are high.


Pascal Vallet: «Swiss quality is not just an empty phrase»

On this small market where quality is part of the country's culture and must be incorporated into any sales strategy, building trust is a step-by-step process.


Olivier Bel: «confidentiality is still strong»

Overall, the situation is good, even if the German-speaking cantons are more rigorous on the whole. Taking into account a tradition of confidentiality, we have built, based on trust, a true database of information on companies.


Jean-François Rondest: Swiss specificities of debt collection

As with all European countries, Swiss law belongs to the system of statute law based on codes and laws, with all of it borrowing from federalism including sharing jurisdiction between the Confederation and cantons. A new unified code of civil procedure since 1st January 2011 has overcome an obstacle to safe and expeditious justice.

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