Switzerland set to avoid recession: agency

Switzerland is to dodge recession, a government body said on Tuesday as it lowered its 2012 growth forecast to 1.0 percent, but warned the global slowdown will cause a rise in unemployment.

Switzerland set to avoid recession: agency
Photopress/Yoshiko Kusano

"The international economic slowdown has also reached Switzerland," the State Secretariat for Economic Affairs (SECO) said in a statement, adding that "dampened economic activity" was expected in coming months.

After a "relatively good" first quarter, SECO said, growth had weakened in the second quarter.

Overall for 2012, the federal department's experts forecast growth of 1.0 percent, compared to the 1.4 percent outlook in June.

It also lowered slightly its position on growth in 2013 from 1.5 percent to 1.4 percent, "contingent upon there being a recovery in the global economy."

But there was no expectation of a "marked" recession, SECO said, thanks to the robust domestic economy which benefited from low interest rates, fallingv consumer prices and high immigration.

In addition, Switzerland's exchange rate mechanism — put in place by the country's central bank to prevent the franc appreciating against the euro beyond 1.20 francs to the euro — had also made "an important contribution" towards helping the "under pressure" export sector, SECO added.

The weakening of the Swiss economy impacted slightly on the labour market in 2012 with the seasonally adjusted unemployment rate rising from 2.8 percent to 2.9 percent in August, SECO's economists said.

Unemployment is likely to rise for the rest of the year "in view of the modest expectations for economic activity" before stablizing in 2013, SECO added.

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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”.