Swiss econ­omy on the up­swing

The neg­a­tive eco­nomic im­pact of the pan­demic de­creases sharply thanks to the in­creas­ing vac­ci­na­tion cov­er­age of the pop­u­la­tion. In many in­dus­tri­alised coun­tries, the re­stric­tions can be lifted step by step and con­sump­tion is in­creas­ing world­wide. While many com­pa­nies held back last year, in­vest­ments are now in­creas­ing again. Due to the growth spurt in the global econ­omy, many raw ma­te­ri­als are in greater de­mand again. Prices for light met­als, steel and oil are ris­ing ac­cord­ingly. The two largest mar­kets, the USA and China, are serv­ing as growth en­gines for the global econ­omy and are help­ing to stim­u­late the ex­port econ­omy of Eu­ro­pean coun­tries. For ex­am­ple, the Eu­ro­pean ma­chin­ery in­dus­try or the Ger­man au­to­mo­tive in­dus­try are vis­i­bly re­cov­er­ing from last year's cri­sis-re­lated slump. The im­pulses from over­seas are help­ing the Eu­ro­pean econ­omy, which is oth­er­wise lag­ging some­what be­hind the global econ­omy.

Strong growth rates in sec­tors par­tic­u­larly af­fected by the pan­demic

The re­cov­ery of the Swiss econ­omy can be char­ac­terised as fol­lows: Those in­dus­tries with the largest growth slumps last year gen­er­ally show strong growth rates in 2021. This ap­plies to both the ex­port in­dus­try and the more do­mes­ti­cally ori­ented in­dus­tries. In the ex­port of goods, the ma­chine, elec­tri­cal and metal in­dus­try, as well as the tex­tile and watch in­dus­try are cur­rently ex­pe­ri­enc­ing a sig­nif­i­cant re­vival in in­ter­na­tional de­mand, re­sult­ing in strong growth com­pared to the cri­sis-rid­den 2020. The same is true for those in­dus­tries that were di­rectly or in­di­rectly bur­dened by of­fi­cial clo­sures and re­quire­ments. Thus, the value chain in the en­tire travel sec­tor, in tourism, gas­tron­omy or in re­tail trade is clearly in­creas­ing again. How­ever, this does not mean that the pre-cri­sis level will al­ready be reached in 2021: In­ter­na­tional travel is only re­cov­er­ing grad­u­ally, and it will be months be­fore trade fairs, con­gresses and large events will be held on the same scale as be­fore the cri­sis. In the air­line in­dus­try, in the hotel in­dus­try and in the event sec­tor, the re­cov­ery will there­fore be sig­nif­i­cantly de­layed.

Con­tin­ued pos­i­tive de­vel­op­ment for “trend” in­dus­tries

How­ever, the eco­nomic re­cov­ery is not lim­ited to in­dus­tries that suf­fered par­tic­u­larly from the pan­demic. In­dus­tries that were able to main­tain or even ex­pand their value cre­ation in 2020 are also op­ti­mistic about the fu­ture. In the chem­i­cal-phar­ma­ceu­ti­cal in­dus­try and the med­ical tech­nol­ogy sec­tor, for in­stance, the growth trend is un­bro­ken. These sec­tors will also be able to grow this year and next, es­pe­cially in those seg­ments that have been neg­a­tively im­pacted by the cri­sis. The Swiss health­care sec­tor as a whole will also grow. In the ser­vices sec­tor, the growth trend in in­sur­ance will con­tinue. The value cre­ation of banks will also in­crease this year and next, al­beit some­what less dy­nam­i­cally. The pos­i­tive but still chal­leng­ing eco­nomic en­vi­ron­ment also en­sures con­tin­ued strong de­mand for man­age­ment con­sult­ing ser­vices. Par­al­lel to the strong growth of the econ­omy as a whole, de­mand for re­cruit­ment ser­vices is also pick­ing up.

The sit­u­a­tion in con­struc­tion is some­what dif­fer­ent. While the sec­tor wit­nessed a slight de­cline at a high evel in 2020, value cre­ation is ris­ing again in 2021. In­com­ing or­ders in the con­struc­tion in­dus­try have risen sig­nif­i­cantly com­pared to 2020. How­ever, the prices for build­ing ma­te­ri­als, which have risen sharply in some cases, are hav­ing a damp­en­ing ef­fect. Over­all, it can be as­sumed that both pri­vate res­i­den­tial and com­mer­cial con­struc­tion as well as the con­struc­tion vol­ume of pub­lic cor­po­ra­tions will in­crease this year and next. The food in­dus­try is also ex­pected to see a slight in­crease in value cre­ation this year and next. In con­trast to the growth sec­tors, how­ever, the nec­es­sary struc­tural ad­just­ments in telecom­mu­ni­ca­tions or the print­ing in­dus­try con­tinue to cause neg­a­tive growth rates.

Pri­vate con­sump­tion in­creases strongly

Many con­sumers saved a lot of money dur­ing the pan­demic. In ad­di­tion, the ex­ten­sive state sup­port, es­pe­cially short-time work com­pen­sa­tion, have pre­vented a slump in in­comes and real wages have risen de­spite the cri­sis. In ad­di­tion, the falling un­em­ploy­ment rate and the de­cline in short-time work are sup­port­ing pri­vate con­sump­tion, which is in­creas­ing strongly over­all com­pared to the pre­vi­ous year. In ad­di­tion, pri­vate in­vest­ment is ris­ing sig­nif­i­cantly after many pro­jects were post­poned last year due to the great un­cer­tainty.

Over­all, real GDP will grow by 3.4 per­cent in 2021. This should bring it back to the pre-cri­sis level in the fourth quar­ter. For next year, too, the signs are point­ing to re­cov­ery, so that GDP is ex­pected to in­crease by al­most an­other three per­cent.

In­fla­tion back in pos­i­tive ter­ri­tory, un­em­ploy­ment rate is de­clin­ing

The broad-based up­swing means that in many cases it is pos­si­ble to re­turn from short-time back to full-time work or to find new em­ploy­ment and that there is no in­crease in un­em­ploy­ment to be ex­pected. Thus, the un­em­ploy­ment rate will fall below the three per­cent mark again in 2022. De­spite the rapid eco­nomic re­cov­ery, con­sumer prices in Switzer­land are not ex­pected to rise sharply. It is true that there will be price in­creases due to short­ages, de­liv­ery de­lays and ris­ing raw ma­te­r­ial and trans­port costs. How­ever, the strong com­pe­ti­tion from abroad and the still ex­ist­ing out­put gap pre­vent a sig­nif­i­cant in­crease in pro­ducer prices in Switzer­land. Due to the resur­gence of shop­ping tourism, in­creased on­line pur­chases and bet­ter price trans­parency, price in­creases can­not be eas­ily im­ple­mented on a broad front in the Swiss mar­ket. How­ever, the in­fla­tion rate will re­turn to a pos­i­tive range.

Ris­ing debt, high asset val­ues, un­cer­tain pan­demic course

The biggest risk for the Swiss econ­omy re­mains the pan­demic: if the epi­demi­o­log­i­cal sit­u­a­tion were to get out of con­trol again, this would have se­ri­ous con­se­quences for the global eco­nomic de­vel­op­ment. For the pos­i­tive out­look not to be damp­ened, the pop­u­la­tion must be vac­ci­nated to a large ex­tent by au­tumn. A sec­ond major risk is as­so­ci­ated with the long-stand­ing low in­ter­est rate pol­icy. The lat­ter is largely re­spon­si­ble for the fact that pri­vate and pub­lic debt has risen sharply in many coun­tries. The pan­demic has now led to a fur­ther in­crease in debt. There­fore, the risk of un­con­trolled de­vel­op­ments on the fi­nan­cial mar­kets, the out­break of a sec­ond euro cri­sis or a resur­gence of the Swiss franc can­not be ruled out. The per­sis­tently ris­ing real es­tate prices in many coun­tries, in­clud­ing Switzer­land, also in­crease the risk of abrupt mar­ket cor­rec­tions in the fu­ture. A third risk for the econ­omy is posed by in­ter­na­tional pol­i­tics. For ex­am­ple, the trade con­flict be­tween the USA and China con­tin­ues to smoul­der, and na­tion­al­is­tic ten­den­cies may in­creas­ingly hin­der world trade in the fu­ture. And fi­nally, with in­fla­tion, a new down­side risk has emerged that has been some­what for­got­ten in re­cent years. Al­though prices are not ex­pected to rise sharply in Switzer­land, com­mod­ity price in­creases, com­bined with a con­tin­u­ing ex­pan­sion­ary mon­e­tary pol­icy, could bring in­fla­tion back world­wide. This would en­tail the risk of a wage price spi­ral also in Switzer­land in the medium term.