How much would a German economic downturn hit Switzerland?

Keystone / Gaetan Bally

The German and Swiss economies are closely linked, especially in certain sectors. This is how the trade relationship has developed.

German economic output was comparatively weak in the second quarter of 2019, according to figures released last week. Compared with the previous quarter, it fell by 0.1% in real terms.

So what does that mean for Switzerland? More than 15% of Swiss exports go to Germany. Europe as a whole accounts for 47% of Swiss exportsExternal link.

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As an open and relatively small economy, Switzerland depends on its foreign trading partners. 

“Today, the value chains are so intertwined internationally that the Swiss economy is dependent on foreign countries for both imports and exports,” says Yngve Abrahamsen, economist and forecaster at the Economic Research Centre of ETH Zurich. “The neighbouring countries are traditionally important for Switzerland, and Germany is still the most important trading partner.”

Importance of Germany falls in relative terms

In absolute terms, Swiss exports to Germany rose from CHF28 billion in 2000 to around CHF44 billion in 2018. This corresponds to average annual growth of around 2.5%.

In relative terms, the importance of the German economy for Switzerland is declining. In 1995, 24% of all exports went to Germany, in 2011 it was still 20%. Exports to Germany then fell further.

The development of Swiss exports reflects the influence of globalisation, according to the State Secretariat for Economic Affairs (SECO).  New markets were opened up during this period, and markets such as in Asia became increasingly important for Switzerland. At the same time, the importance of trade with neighbouring countries is declining.

Differences by sector 

Germany remains important. But how strongly does the Swiss economy feel it when Germany’s economy weakens? Abrahamsen says it depends on the sector and the company. 

Basically, however, a supplier in Switzerland is rarely dependent on a single customer in Germany, so that declines in demand in one market usually have hardly any effect.

According to Abrahamsen, the machinery, electrical and engineering industries are particularly dependent on German customers. Many suppliers sell products to Germany, but the two countries are also closely intertwined through research and development cooperation. In the automotive industry alone, suppliers in Switzerland employ 34,000 people and generate a turnover of CHF19 billion. The chemicals industry is also dependent on the German economy.

Independent industries

The watch industry and the pharmaceutical industry are different. Although Germany is an important customer for these sectors, says Abrahamsen, the demand for their products is not much influenced by economic developments. The financial sector is also less dependent on the German economy than others.