Switzerland may tip into recession: economist

The Swiss economy could tip into recession this winter, a noted economist warned in a newspaper interview published on Saturday.

Switzerland may tip into recession: economist
Photopress/Gaetan Bally

Growth slowed in the third quarter to only 0.2 percent over the previous three months, amid a drop in exports blamed on the strong Swiss franc, which is seen as a safe-haven currency in times of financial turmoil.

“It is quite conceivable that we will observe two negative (growth) quarters,”  Aymo Brunetti, chief economist of the State Secretariat for Economic Affairs (SECO), was quoted as saying by the Aargauer Zeitung.

But he added that “as a whole, the Swiss economy is still doing well”.  

Brunetti pointed to a weakening in the July-September quarter, when the growth of 0.2 percent over the previous quarter was the lowest rate since the the first half of 2009 when Switzerland was last in recession.

Asked about the eurozone debt crisis, Brunetti said he did not expect the worst-case scenarios to become a reality and assumes that “a solution can be found” — adding that otherwise “it would really be a disaster”.

“The bankruptcies of countries could trigger a massive banking crisis” that could be worse than the 2008 global downturn, he was quoted as saying, adding that in many countries “the public coffers are empty”.

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Why Switzerland continues to attract foreign companies despite the coronavirus pandemic

Despite the pandemic, 220 foreign businesses set up their offices in Switzerland in 2020.

Why Switzerland continues to attract foreign companies despite the coronavirus pandemic
Switzerland is a magnet for foreign companies. Photo by Valeriano de Domenico/AFP

While this number is 9 percent lower than in the previous year, these companies have created 11 percent more new jobs — a total of 1,168 — than in 2019. Most of the new jobs were created by companies from China, the United States and Germany.

About 3,600 more positions are expected to be offered by these enterprises in the next three years, according to data from SRF, Switzerland’s public broadcaster.

In fact, Switzerland is one of the very few countries that have been able to attract international companies to its shores in 2020, a notoriously bad year for the global economy.

READ MORE: Why Switzerland’s economy is on the up despite the coronavirus pandemic

Experts believe this is due to the country’s strengths, including political, economic and financial conditions.

“Even in a time of crisis, Switzerland scored thanks to its stability, predictability and security”, said Patrik Wermelinger, member of the executive board of Switzerland Global Enterprise (SGE), which promotes the country abroad on behalf of the federal government and the cantons.

There are also other reasons that had prompted foreign companies to come to Switzerland in 2020, despite the economic uncertainty and travel restrictions.

“Protection of legal rights, freedom, and personal responsibility are stronger in Switzerland than in many other countries, even in times of pandemic”, said SGE’s co-president Walter Schönholzer.

Switzerland’s attractiveness is also boosted by studies showing the country’s economy remains the strongest in the world.

Even though the health crisis plunged Switzerland’s economic activity into a “historic” 8.2-percent slump in the second quarter of  2020, the country still boasts the world’s most resilient economy, according to research by an insurance and reinsurance company Swiss Re. 

The International Monetary Fund (IMF) expects a 3.5-percent rebound in Switzerland’s gross domestic product (GDP) in 2021.

It said Switzerland’s economy absorbed the shock of the pandemic better than other European countries and it “has navigated the Covid-19 pandemic well”.

IMF added that Switzerland’s “early, strong, and sustained public health and economic policy response has helped contain the contraction of activity relative to other European countries”.