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Successfully investing in Switzerland

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last updated on 19 May 2021 | reading time approx. 4 minutes

 

 

 

How do you assess the current economic situation in Switzerland?

Following the pandemic-related decline, the Swiss economy continued to recover in 2022. GDP developed as expected and the unemployment rate reached its lowest level in twenty years. Compared with other countries, inflation remained within limits (around 3.5 percent). GDP growth of 1 percent is expected for 2023. GDP in the fourth quarter of 2022 was 0 percent. In the first quarter of 2023, the value of 0.5 percent was reached. Italy and Spain show roughly similar growth.

 

Added Value in the chemical/pharmaceutical industry declined by 0.6 percent compared with the previous two quarters, but all in all remained at a high level. In the manufacturing sector, value added increased by 0.3 percent. The other sectors included in the industry were able to record a pleasing value added of 0.8 percent, after three negative quarters.

 

In the first quarter of 2023, both the construction sector (+0.8 percent) and the energy sector (+1.5 percent) recorded an increase in added value. The transport and communications sector grew at an above-average rate of 0.7 percent. More passenger transports were registered, not only but especially in the case of air passengers. The increase in travel activity also led to a rise in value added in the hospitality industry (+1 percent).

 

The retail sector recorded overall growth of 2.1 percent. Sales in the food and non-food sectors were stable in the first quarter of 2023, while those with fuels declined. Overall, retailers have positive expectations for the coming months.

In the fourth quarter of 2022, growth in private consumption was 0.2 percent, while spending rose to 0.6 percent in the first quarter of 2023. 

Significantly more was spent on healthcare, housing and energy. Spending on restaurant visits and accommo­dation also increased, which was reflected in the increased value added in the hospitality industry.

Investments in the construction industry are at a low level, although the problem of supply bottlenecks has receded, the weather has been favorable and price pressure has decreased. The construction industry continues to suffer from a shortage of skilled workers, which means that no increase in construction activity can be expected, despite a good order situation. Exports of goods as well as imports of goods increased significantly in the first quarter of 2023. Goods exports recorded an increase of 5.5 percent, while goods imports grew at 5.4 percent. At the beginning of the year, inflation was up to 3.4 percent, due to higher electricity tariffs. In April, it declined to 2.6 percent.

Inflation increased in the area of services in particular, i.e. there were price adjustments in the hospitality industry, package tours and transport services

Unemployment increased in the first quarter of 2023 due to seasonal factors. However, at 1.9 percent, it is still at an exceptionally low level.

   

How would you describe the investment climate in Switzerland? Which sectors offer the largest potential?

The global efforts to combat climate change provide a good starting position for companies in the field of energy and environmental technology. Products and services in the field of infrastructure and engineering are also in demand. Potential is offered by companies in the equipment sector, such as in the IT industry. Due to the advancing digital economy, products and services are still in demand.
 

What challenges do German companies face during their business ventures into Switzerland?

The recruitment of skilled workers continues to be a challenge. The number of young employees entering the labour market cannot compensate for the number of people leaving the labour market due to retirement. The situation has worsened again since the last report. According to figures from the Federal Statistical Office, there were more than 120,000 unfilled positions at the end of 2022. The manufacturing, healthcare, hospitality, building industry and IT sectors are particularly affected.
 
Switzerland is as well affected by increased prices for energy, raw materials, and logistics services. The interruptions in production and supply chains triggered by the pandemic also continue to represent an uncertainty, which has been deepened by the war in Ukraine.
 
We recommend that German entrepreneurs who are going to operate across borders deal with the issue of permits (including notification requirements) and minimum wage requirements as well as VAT differences between the EU and the Swiss customs territory (including Liechtenstein) at an early stage. 
 
Switzerland continues to offer entrepreneurs interesting opportunities because the economy is resilient due to diversification.
 

Switzerland is in negotiations for a free trade agreement between the EFTA states and India. Why are free trade agreements important for Switzerland in general and why with India?

For Switzerland as a country poor in raw materials, the export business is one of the most important pillars of the economy.
 
The international trade environment has changed significantly over the past decades. Protectionism in the form of punitive and protective tariffs, export restrictions and other trade barriers is steadily increasing. For Switzerland, as a small export-oriented country, it is becoming increasingly difficult to remain competitive. Swiss companies are struggling on the market due to the strength of the Swiss franc.
 
Trade between EFTA and India amounted to around USD 6.5 million in 2022. During the past five years, imports from India to EFTA increased by 16.4 percent, while exports to India increased by 7.4 percent. Exports were mainly machinery and chemical products. On the import side are organic chemicals, textiles and metals.
 
The conclusion of the agreement will eliminate disadvantages that currently exist vis-à-vis other countries that already have an agreement with India.
 
The delegations last met in Brussels on May 14, 2023. Both EFTA and India hope for new opportunities for companies and individuals, which would, among other things, increase trade and investment flows and could lead to economic growth on both sides.
     

In your opinion, how will Switzerland develop?

The federal government's expert group forecast below-average growth of 1 percent for 2023. Developments in the first quarter confirm this assessment.
 
Switzerland will continue on its current course by further deepening and strengthening cooperation with existing trading partners on the one hand and negotiating new free trade agreements on the other. Negotiations are currently underway with India, Vietnam, Malaysia and the Republic of Moldova, among others.
 
The EU is and remains Switzerland's most important trading partner. In this respect, the economic situation of the EU countries also influences Switzerland as a business location. In 2021, the volume of trade between Switzerland and the EU accounted for 51 percent of Switzerland's total trade in goods and services. Switzerland attaches great importance to this relationship because it is particularly significant.
 
Switzerland remains an interesting business location. It is geographically located in the center of Europe, offers good infrastructures, attractive tax systems and stable political conditions for companies, and has a high standard of living.

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