Swiss to avoid recession this year: Credit Suisse

Despite the negative impact of the strong franc, Switzerland should be able to avoid a recession this year “thanks to the robust situation of the global economy,” Credit Suisse said in a report issued on Tuesday.

Swiss to avoid recession this year: Credit Suisse
Photo: Credit Suisse

However, the bank in its Monitor Switzerland report for the first quarter of 2015 warned that strong growth momentum is not expected this year — “a year of stagnation” — or in 2016.

The report, from Claude Maurer, an economic researcher for Credit Suisse, predicts 0.8 percent growth in the Swiss economy, following two percent growth last year.

The franc has appreciated in value about ten percent since January when the Swiss National Bank abandoned its policy of pegging the Swiss currency to the euro at a rate of 1.20 francs per euro.

The stronger franc is hurting Swiss exporters by making their products more expensive to customers in the eurozone, Switzerland’s biggest market for goods and services.

But Credit Suisse said it considers a “recession to be unlikely”.

It said a “super cycle” fed by immigration, the real estate boom, low inflation and low interest rates” continues to underpin consumer spending.

The super cycle “continues to turn, even if more slowly than before”.

The bank said economic recovery in Europe in the US are offsetting the negative effects from the loss of competitiveness in the export sector.

Unemployment insurance, meanwhile is acting as an “automatic stabilizer” and an economic safety net, while the central bank stands ready to intervene if the Swiss franc appreciates in value too much, the report said.

However, the export sector will suffer for some time to come, impacting expected growth in 2016 of 1.2 percent, which is below-average growth for Switzerland.

For more on the report, check here.

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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”.