Swiss economy waits for “crisis” to end

Consumers are still spending, despite a slump in investments Keystone

Switzerland's economy is once again giving cause for concern - growth has stagnated and unemployment is on the up.

On Friday, the jobless total topped the psychologically important 100,000 level for the first time since April 1999.

Although the nation’s key figures are in better shape than ten years ago, pessimism about the future is rife.

The latest economic doom and gloom has come courtesy of Switzerland’s dairy industry. This week Swiss Dairy Food announced job losses of 310.

This came just days after publishing house Publigroupe, weapons maunfacturer Ruag and Baumgartner Papiers made a total of 500 people redundant.

There were also recent job cuts at the media firm, NZZ Group, and at the insurer, Swiss Life/Rentenanstalt.

Since the beginning of the year, thousands of jobs have been cut in Switzerland, affecting most sectors of the national economy – a trend which Swiss economist, Silvano Toppi, says is bound to continue.

Even the normally sturdy banking world has been forced to clip its wings in the wake of stock market declines and the recent Italian tax amnesty, which, according to some estimates, has seen some SFr88 billion ($60 billion) head south.

Stagnation or recession?

Analysts have recently cut national growth predictions to around 0.3 per cent.

Several months ago, a slew of new financial data painted an even more alarming picture, showing that economic growth had declined for four consecutive quarters until March 2002.

Recessions are usually defined as occurring after two quarters of negative growth.

Yet despite the bleak figures, the Swiss economics ministry says the economy is merely “stagnating”.

“We prefer to talk about a slowdown or deceleration in growth,” Bernd Schips, head of the Zurich-based Swiss Institute for Business Cycle Research, told swissinfo.

“In this sense, the worst is already behind us. The economic cycle has been improving since the second quarter of this year.”

Déjà-vu all over again?

Irrespective of how experts choose to define the current problems, most agree that Switzerland’s stalling economy is badly in need of a kick-start, just as it was in the early 90s.

Echoing developments of a few years ago, the unemployment rate is beginning to creep up again, reaching 2.8 per cent in September.

In 1997, unemployment peaked at 5.7 per cent – an exceptionally high rate for Switzerland.

“But this is where the comparison [with the early 1990s] ends,” claims Schips.

“At that time, the macro-economic climate was dominated by very restrictive monetary and taxation policies. Banks were undergoing a restructuring phase and the Swiss franc suddenly and unexpectedly appreciated.”

“Today, the situation’s different and it’s better – aside, that is, from the international climate over which we have no control,” Schips continues.

Uncertainty

But Silvano Toppi thinks otherwise. “The fundamental problem is uncertainty. It’s not clear which direction we’re heading in. And the current economic structure, which is dominated by liberalisation, has accentuated this uncertainty.

“We won’t come out of it that easily. Particularly if we continue down the current path,” he warns.

The biggest worry, Toppi says, is the crisis in capital investment. “And this [is occurring] despite extremely low interest rates, which should actually crank up investment.”

To add to Switzerland’s woes, the world economy is also treading water.

The economic recovery in the Alpine nation, which earns every second franc from abroad, is dependent on the recovery of its most important trading partners, namely Japan, the USA and Europe.

swissinfo, Marzio Pescia

Key facts

The unemployment rate rose to 2.8% in September, compared with a peak of 5.7% in 1997.
Economic forecasters have recently cut national growth predictions to around 0.3 per cent.