Economic outlook moderately positive

Bern, 13.12.2012 - Economic forecasts from the Federal Government’s Expert Group – Winter 2012/2013*. As a result of deteriorating global economic conditions, economic activity also slowed in Switzerland in 2012, with unemployment reporting a slight rise. However, the growth in GDP clearly remained in positive territory (forecast 2012 +1%). The short term economic outlook for the months ahead is mixed, although there are still no signs of the situation worsening into a more pronounced downturn. Providing the sovereign debt crisis in the Euro region remains under control and the global economy gradually returns to a firmer footing, the Swiss economy could regain momentum during the next two years. The Federal Governments Expert Group is reaffirming its previous assessment which anticipates moderate GDP growth for 2013 (+1.3%) and which could strengthen further in 2014 (+2%). Unemployment is expected to further rise slightly in 2013.

International economy
The already fragile recovery in the global economy weakened again in 2012. The weak economic and financial situation in the Euro zone has spread to other regions of the world, including the emerging countries. At the year-end however, alongside the dark clouds hanging over the situation, the first signs of light at the end of the tunnel are appearing. These first signs allow for cautious optimism and to anticipate a gradual improvement in Switzerland‘s international economic environment over the next two years.

For example, the measures taken by the ECB to deal with the Euro debt crisis (the willingness to buy up treasury bonds from the peripheral countries) have at least temporarily provided some relief on the financial markets and created a time window to implement credible fiscal and structural reforms. Confirmation of clear progress in the structural reforms in the Southern European countries of the Euro region and an improvement in their competitiveness is coming from various sources (including the OECD). Nevertheless and despite these positive trends the economic outlook remains for the time being extremely subdued. The Euro region as a whole is likely to experience a continuing economic downturn in 2013 and only begin to recover in 2014. There remain significant differences in the extent of this downturn in the various countries. Particularly in the crisis-hit countries of Southern Europe where the fiscal policy consolidation and debt deleveraging processes in the private sector are having a significant detrimental impact on economic activity, there is still no end in sight to the severe recession. By contrast, in those core countries which are not suffering from any serious structural problems, such as Germany, the slowdown may only be temporal in nature. The majority of the economic regions outside Europe are expected to provide a moderately positive impetus to the global economy. There is generally expected to be a continuation of the (cautious) economic recovery in the USA. However, this is subject to a budget compromise being found between the political parties in order to avoid a “fiscal cliff” in the short term, with damaging consequences for the economy. The rapidly expanding emerging countries in Asia and other global regions, in which growth rates also showed a marked slowdown in 2012, are likely to soon succeed in overcoming their period of weakness. In China for example the latest indicators suggest that the slowdown in the economy has bottomed out and it is now beginning to move back towards a firmer footing.

Economic forecast for Switzerland
Although unfavourable economic and currency conditions for exports markedly slowed down the Swiss economy in 2012, they did not bring it to a halt. After volatile quarterly performances (negative 2nd quarter, strong 3rd quarter) the assessment of the Expert Group is that the economy will grow by 1% for the full year 2012 (no change in forecast since September). This is lower than in the previous years (in 2010 the economy grew by 3%, in 2011 by 1.9%) but clearly far away from a recession of the kind being experienced by many Euro countries.

The fact that – as in the global financial crisis of 2008/09 – the Swiss economy has been able to perform relatively well under difficult conditions is mostly due, to the interaction between a sound domestic economy and the resistance to crisis by some key branches of the export industry. Sectors of the economy with a domestic focus, such as construction, public and private sector services, are benefiting from continued immigration and low interest rates. Although the general situation is problematical in the export sector, the floor established for the exchange rate between the Swiss Franc and the Euro, plus robust individual sectors such as pharmaceuticals and the watch industry, are helping to mitigate the situation. On the other side, the subdued external environment and the currency situation are having a serious impact particularly on the MEM (machine-building, electrical industry and metal industry) sectors and on the tourism industry which face increased margins pressures.

The short term economic outlook for the months ahead is mixed, although there are still no signs of the situation worsening into a crisis. Providing the sovereign debt crisis in the Euro region remains under control and the global economy gradually returns to a firmer footing, the Swiss economic motor could regain impetus over the next two years. For the year 2013 the Expert Group anticipates moderate growth in GDP of 1.3%, i.e. the previous forecast (1.4%) remains virtually unchanged. Since the economic upturn is likely to gradually gain strength, stronger growth of 2% is expected for 2014.

The pattern of development in the various sectors is likely to remain diverse, although a slight narrowing of the distinctive gap that has existed up to now between the domestic and export sectors is expected. On the export side the situation appears to have flattened out and higher growth rates are likely to be achieved in 2013 and 2014. By contrast, there could be a temporary loss of impetus in the domestic economy. Consequently, in view of the less favourable prospects for incomes and employment, a slightly slower rate of expansion in private consumer spending is assumed. Corporate investments will be held back by the weaker level of capacity utilisation, particularly in the industry sector. In view of the low interest rates and increasing population, the construction industry could achieve further growth, particularly in the area of building construction.

The prospects for the labour market have worsened slightly. Although there was a marked rise in employment up to the autumn, the latest surveys increasingly indicate a reduced willingness of many companies to take on new employees, both in the industry as well as in the services sector. The growth in employment could therefore come to a temporary halt over the coming quarters until the economy starts to recover strongly again. The small rise in unemployment which began at the start of 2012 is likely to continue in 2013 and taper off in 2014. The Expert Group expects annual average unemployment rates of 2.9% for 2012 and 3.3% for 2013 and 3,3% for 2014.

Economic risks
International economic prospects remain surrounded by a number of uncertainties. The risk of an escalation in the debt crisis in the Euro region has reduced as a result of the successful containment measures over recent months. However, the crisis is still a long way from being resolved. In view of the weak economic situation and social tensions, it cannot be ruled out that structural reforms in the Euro crisis countries make slower progress than hoped. Furthermore, uncertainty could return to the financial markets. The lack of clarity in the budget situation in the USA poses another risk: the failure to provide a compromise solution (“fiscal cliff”) – through spending cuts and tax increases - could have a strong negative effect on GDP growth in the USA. Depending upon the scope of this impact, it could spread to the global economy. Finally, there is currently still uncertainty surrounding the anticipated recovery in growth in some emerging countries.

However, alongside these negative risks there is also potential on the upside for the world economy. As such, there have been increasing signs recently of US companies postponing investments until there is some clarity on the budget decisions. A resolution of the US budget problems as well as a sustained period of calm in the Euro region could therefore lead to catch-up effects on the investment side and give a boost to the international economy.

* The Federal Government’s Expert Group on Economic Forecasts publishes forecasts for the Swiss economy on a quarterly basis. This media release comments on the current forecast of December 2012. The current edition of "Economic Trends", a quarterly publication from the SECO, integrates these forecasts and goes into more detail on other aspects of the current economic development. This publication appears in printed form as an appendix to the February, April, July and October issues of the magazine "Die Volkswirtschaft" ( It is also available on the internet: (

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