A Swiss government-commissioned report published on September 22 suggests that the future is looking brighter for the Swiss economy, and for the wider global economy ' but difficulties still lie ahead.
According to the report, the global economy is recovering faster than anticipated, while in Switzerland the recession has slowed in Q2, and for the second half of the year a positive change is underway.
The report predicts a weaker decline of the Swiss gross domestic product (GDP) than in June (minus 1.7% instead of minus 2.7%), although it also predicts that the international economy, after its first strong recovery, will run out of steam again in the course of 2010, limiting further economic recovery in Switzerland, which is expected to experience weak GDP growth (0.4% instead of minus 0.4%) and rising unemployment.
A government statement on the report's findings states: "It remains to be seen ' whether next year the economy will be able to continue its dynamic positive growth when the stimulating impulses from financial policies start to diminish. The drastic resuscitation of private consumer and investment demand required for such dynamics to be sustainable is opposed, though, by substantial obstacles."
"Accordingly, growth in private consumption in the US, for example, could remain below average for years to come because private households will have to increase their savings rate more than they already have. And in addition, capacity utilization which, for the time being, remains extraordinarily low could represent a major obstacle to a strong recovery of worldwide corporate investment which would be typical of an economic upturn."
"Problems that banks are still confronted with (e.g. further considerable write-offs of bank loans) cannot be expected to be overcome any time soon and could continue to represent an impediment to economic growth," the government statement continues. "Experience from the past has shown that forceful recoveries observed after severe recessions have often failed to materialize in the face of banking and real estate crises."
The report suggests that the recession in Switzerland is still relatively mild compared to the global economic climate, mainly due to a stable domestic demand, namely private consumption and building investment, which could partly offset the losses incurred in the export industry and the finance sector. But prospects for the labor market remain bleak, and unemployment figures are unlikely to fall before late 2010.
The report warned that the future of the Swiss financial center depends to a large extent on the degree to which protectionist tendencies evolve, and the degree to which Swiss companies continue to gain access to foreign markets. However, it believes Switzerland could emerge from the financial crisis stronger than before.
