Switzerland: still afloat, not quite plain sailing

Lausanne, Switzerland (GenevaLunch) – Switzerland’s solid base will stand it in relatively good stead in coming months, helping it resist the global economic crisis.

The country can expect only “soft growth” in the next few years, however, according to the World Competitiveness Report published 20 May by business school IMD in Lausanne (Ed. note: GL story on overall report).

The country held its fourth place slot in the rankings and did relatively well, landing in sixth place in the report’s new “Stress test for competitiveness,” rankings, based on future-oriented analyses. “Compared with many other countries, the fundamental economic, political and financial pillars of Switzerland show a remarkable stability.

“Diversification, quality of life, efficiency of the government (third out of 57), businesses (third) and infrastructure (fourth), confirm the excellent position of Switzerland in terms of competitiveness,” says Anne-France Borgeaud Pierazzi, an economist with the IMD team that produced the report.

The report’s authors caution that Switzerland joined the recession late and is now approaching what it calls the bottom of the U, with the outlook gloomy for the rest of 2009, followed by a slow climb.

The true impact of the global economic crisis will be apparent only at the end of 2009 or early 2010, they believe.

Borgeaud Pierazzi notes: “Since autumn 2008, Switzerland has experienced a serious drop in its attractiveness: the flow of investments has dropped from 12 percent of GDP in 2007 to 3 percent in 2008. The current level has further decreased and export growth will fall this year. With Germany, the primary commercial partner of Switzerland, announcing an annus horribilis, the effects of the crisis will therefore continue in the coming months. The deterioration of the labor market, which began at the end of 2008 in the industrial sector (construction), has spread to the service sector (hotels, banks). The level of private consumption, stable in 2008, will worsen in 2009. Swiss citizens – living in a replacement economy – will delay purchases for some time still and will tend to save money instead.”

The report is based on measurable data and surveys of business leaders. Their perceptions were more negative than in the past, true for all countries, but Switzerland fared relatively well, with executives noting that taxes and pay packages are not perceived as discouraging for managers to advance and for entrepreneurs, working conditions remain good with a highly skilled work population, good infrastructure and very good education, where Switzerland ranks fourth overall.

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