Switzerland: economy is bending
Investors have made it one of their favourite havens during this period of recurrent crises, from global finance to sovereign debt in the eurozone. Proverbial political stability, sound management of public finances, a complex but attractive tax system, many very innovative small businesses and a flexible labour market. Not forgetting, of course, a renowned financial market, making it a major player on the international scene in wealth management activities. These are strengths which sometimes turn into weaknesses.
A very open economy, the Confederation has been faced with a sharp rise in the Swiss franc that only a bold pegging to the euro has been able to curb. Exporters have therefore been able to limit the damage, while reducing their costs and margins. But property has entered a dangerous area and although they are not inevitable, bubble risks cannot be excluded. Even though experts consider that the Swiss franc is still overvalued.
For banks, the main cog of the Swiss economy, times are less straightforward than in the past. The planned disappearance of banking secrecy, new international regulations, lower margins and increased risks of mortgage lending are all challenges. Highly concentrated between UBS and Crédit Suisse, the sector still represents 5 times the national wealth. It was 6.6 times the GDP in 2007.
And despite a strong presence abroad, a refocusing on the domestic market has taken place: assets realized within the Confederation have increased by 20% since 2007.
Nevertheless, this small highly competitive market where the consumer is demanding, with a high purchasing power, remains a test for export candidates. If they can play the quality and precision card to gain the trust of their partners, given a strong tradition of confidentiality, their margins could be substantial. And the country should gradually return to growth after a meagre increase of some 0.7% of GDP in 2012, thanks to increased household consumption.