Economic upturn also extending to the export industry - prospects of lower unemployment

Bern, 19.12.2013 - Economic forecasts from the Federal Government’s Expert Group – Winter 2013/2014* - The economic situation for Switzerland has continued to brighten over the autumn months. The anticipated positive upturn in the export industry appears to have been confirmed. Further increasing exports and consequently a broader-based economic expansion are expected, since domestic economy, which has held up well since the financial crisis, should remain robust. Providing the international economy continues on a gradual path of recovery there are good prospects for a strengthening economic upturn in Switzerland over the next two years. Following the solid GDP growth of 1.9% in 2013, the Expert Group expects growth to accelerate to 2.3% in 2014 and 2.7% 2015. In the labour market this is also likely to be reflected by lower unemployment.

International economy
The recovery in the global economy from the crisis of the recent years, which has so far been hesitant and fragile, is likely to strengthen over the next two years. In this context the economic outlook for the various economic regions remains uneven.

The economic recovery is making good progress particularly in the USA. The consequences of the real estate and debt crisis appear to have been absorbed: domestic households have succeeded in reducing their high levels of debt over recent years, the banks have been restructured and the real estate markets are stabilising. There are also signs of a continual improvement on the labour market; in November the unemployment level fell to 7%, the lowest since the start of the financial crisis at the end of 2008. In addition, the continuing unresolved political dispute about the national budget is likely to have been defused by the recent budget compromise achieved for 2014/15, consequently the risk of drastic cutbacks in spending appears to have been essentially averted. Consequently, an upswing in the US economy for 2014 and 2015 (with anticipated GDP growth rates of around 3%) is likely to take place. In view of the positive economic outlook there is increasing probability that the US Federal Bank will soon begin its fiscal policy tapering (gradual reduction in the bond purchase programme) - possibly in the next few months.

An improvement in the weak economic activity in the Euro zone is also expected, albeit only a gradual one. Whilst the economic growth in the core countries is once again picking up pace, particularly in Germany, the economic downturn in the periphery countries of the Euro zone now appears to be coming to an end. However, economic activity in these periphery countries will also continue to be held back by the policy of austerity, bank problems and the sharp rises in unemployment which will only ease slowly. In view of the continuing weak economic situation and falling inflation rates in the European currency zone, the ECB decided on a further interest rate cut at the beginning of November. The economic recovery over the next two years is expected to be only gradual (anticipated GDP growth 2014 +1%, 2015 +1.5%), which might still not be sufficient for a marked reduction in the high levels of unemployment in many countries.

By contrast to the improvement trends in the industrialised countries, numerous emerging nations are continuing their struggle to regain their lost economic impetus. The unfavourable consequences of the change in mood on the global financial markets (expectations of the beginning of a return to fiscal policy normalisation in the USA)  will put pressure on many emerging countries as a result of sudden capital outflows. In addition to that, structural factors are holding back growth in some emerging countries (ageing population, inadequate economic reforms). Accordingly, the pace of the pick-up in their economic growth in 2014 and 2015 is likely to be slow and in most cases remain under the usual growth levels over recent years. One particular exception is China where the economy has been robust in 2013 and has hardly been affected by the negative effects of the financial markets. However, even in China economic growth is expanding at a moderate rate (approx. 7-8%) compared with the past.

Economic forecast for Switzerland
The economic picture for Switzerland has continued to brighten over the Autumn months. The anticipated positive upturn in the export industry appears to have been confirmed. As such, following an extended period of stagnation, exports of goods in the 3rd quarter have reported a strong increase which was broadly supported across the various sectors. The sentiment indicators for the (export) industry recently released show a further improvement. Tourism exports (number of overnight stays by foreign guests) are continuing to recover. The global economy is providing a slight tailwind for the export sectors. In addition, the exchange rate floor against the Euro continues to represent an important support for a stabile currency environment. Providing the international economy remains on a gradual path of recovery Swiss export growth over the next two years is likely to gradually strengthen.

The domestic economy - previously the dominant force behind growth – is expected to remain robust. The Expert Group expects that the factors driving growth over recent years, in particular the on-going immigration and low interest rates, will have a continual effect, providing support for household consumption as well as for the construction and real estate industry. Nevertheless, household consumption next year is unlikely to continue at the same high levels as 2013, one of the reasons being the lower increases in real salaries. Conversely, investments in equipment are likely to provide an increasing positive impetus, previously having been a weak spot in the economic recovery. The relatively low levels of capacity utilisation in the export-driven sectors, as well as the prevailing uncertainty about the economic prospects, have dampened investments - despite historically low interest rates. This is a phenomenon which has been identified in many other countries. However, as the economic recovery advances and confidence grows we anticipate a gradual pickup in investments in equipment.

The prospects for a pick-up in the pace of the Swiss economy over the next two years are therefore generally good. In line with the last forecast in September, the Expert Group anticipates solid GDP growth for 2013 of 1.9% (previously 1.8%) followed by a gradual acceleration to 2.3% 2014 (forecast unchanged) and 2.7% 2015. The Swiss economy is, therefore, growing at a higher-than-average level, compared with other European Countries. This is the case since the last couple of years. One driving force is the ongoing increase in population, which is expected to continue over the next two years.

As the economy picks-up the outlook for the labour market is brightening. In this context the industry sector is also likely to see an increase in employment levels. Over the recent years the industry sector had suffered job losses against the background of the difficult export environment – in contrast to the continuing, positive development in employment in the construction industry and most services sectors. As a result, the downward trend in unemployment can be expected. Since the continuing slight increase in (seasonal) unemployment over the last approx. two years has now almost come to a halt over recent months, from 2014 the unemployment level is expected to start falling. This trend is likely to further accelerate in 2015 as the economic growth strengthens. The Expert Group anticipates average annual unemployment levels of 3.2% for 2013, 3.1% for 2014 and 2.8% for 2015.

The prospects for inflation are likely to remain moderate. Although the phase of negative inflation rates, caused primarily by the strength of the Swiss franc and the associated reduction in import prices, now appears to have come to an end and inflation rates are once again moving into positive territory, rapid inflationary pressure is not expected. Either from the international environment in view of the slow recovery in many countries and relatively high levels of unemployment, or in Switzerland where the domestic inflationary pressure is likely to remain minimal for the foreseeable future despite the stronger upturn. The Expert Group anticipates slight positive rates of inflation of 0.2% for 2014 and 0.4% for 2015, compared with -0.2% 2013.

Economic risks
Although the outlook for the Swiss economy is more positive for 2014 and 2015, different negative risks due to the still fragile stance of the world economy should not be ignored.

Despite of a certain easing of the debt crisis, the weak economic situation in the peripheral countries of the Euro area – with a remaining high level of unemployment – carries hidden risks for economic and political setbacks in the structural reforms. Further, how the exit from the extremely expansive monetary policy will proceed in the coming years is still unclear. As seen in 2013, increased volatility in the international financial markets (e.g. sharp rises in interest rates, sudden capital outflows from the emerging countries) could be observed as soon as important central banks begin to change their orientation, with some damaging consequences for the global economy.

On the other side, the chances for a stronger recovery in the global economy could be higher than expected. A more positive scenario could take place, if a growing confidence in economic activity were to lead to a sharp pickup in the levels of corporate investments which have to-date been rather cautious in many countries. Most likely these could come from the USA with the effects being felt globally. In the Euro zone, further rapid advances towards the banking union could help to improve lending conditions and the stability of the banking systems, a factor which represents a major hurdle for the economic recovery in the peripheral Euro zone countries.

* 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 2013. The current edition of "Economic Trends" (Konjunkturtendenzen/Tendances conjoncturelles), 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 free of charge on the Internet: (

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