Established in 1870, economiesuisse is a centralized organization for the Swiss business sector, representing the interests of competitive, globally connected, and socially responsible Swiss businesses. As the alliance of Swiss business, economiesuisse acts on behalf of around 100,000 companies, of varying sizes, and represents a total workforce of two million people across all regions of Switzerland. Membership comprises 100 trade and industry associations, 20 cantonal chambers of commerce, and individual companies across an array of sectors.
The group serves to “advocate for the greatest possible framework conditions for Swiss businesses, from small and medium-sized enterprises to giant multinationals, as the link between the political arena, the economy, and society.” To this end, economiesuisse strives to maintain a transparent and dynamic relationship with economic policymakers and the general public, one that is geared towards solving problems synergistically for the greater good of the Swiss economy.
Bridges spoke with Prof. Dr. Rudolf Minsch, Chief Economist at economiesuisse, about matters pertaining to the current state of the Swiss economy, emerging trends in the global economy, as well as Swiss-Japan economic relations.
Bridges: Can you provide an overview of the current state of the Swiss economy, highlighting key strengths and challenges? Additionally, how does economiesuisse envision itself addressing these challenges and further fostering economic growth in traditional sectors such as finance and manufacturing?
Dr. Minsch: The weak economy in various export markets due to inflation, geopolitical uncertainties and elevated interest rates is dampening foreign demand for Swiss goods and services. Domestic demand, on the other hand, is comparatively stable. The Swiss economy is coping quite well with the challenges in a difficult market environment, although growth remains below its potential. Throughout this year, we estimate that the Swiss gross domestic product (GDP) will increase by 1.1 per cent. In other words, the subdued economic development will continue in 2024. The unemployment rate will not rise significantly, and inflation will remain at around two per cent.
The Swiss economy is focusing on increasing productivity, greater innovation, and a concentration on high value-added activities. The increasing labor shortage, which is a major obstacle to growth, poses a particular challenge. However, the demographic development will continue in Europe, in general. This makes it more difficult to find the right personnel in and out of the country. The increasing bureaucracy that can be observed in many countries also creates additional costs and burdens the economy.
In the ever-evolving global economy, what emerging trends do you see impacting Switzerland, both in terms of challenges and opportunities? How is economiesuisse working to ensure that Switzerland remains competitive and innovative, particularly in emerging sectors such as technology and sustainability?
We would like to highlight three problem areas: Firstly, the Swiss economy, like Japan’s, is very export-oriented. In net terms, i.e. subtracting imported inputs, Switzerland generates around 40 per cent of its total value added abroad. Therefore, the global trend towards more protectionism is particularly damaging to our export industry. Accordingly, we also see the trend towards de-globalization as very problematic.
Secondly, energy prices in Europe and also in Switzerland are significantly higher than they were before the pandemic. It can be assumed that this will continue. This is having a negative impact on competitiveness, in particular on that of energy-intensive companies.
Thirdly, the Swiss franc is strong and still tends to appreciate. Although inflation in Switzerland is lower than in Germany or the USA, for example, the currency situation remains a burden as many companies find it difficult to increase their prices abroad, accordingly.
Unfortunately, there is no patent remedy for dealing with these three problem areas. The only way is to exploit one’s own strengths, invest in energy saving technologies and solutions, increase productivity, and remain innovative.
Switzerland and Japan have a history of economic cooperation. Could you elaborate on the existing connections between Switzerland and Japan, and identify potential areas for deeper collaboration that have not been fully utilized? How can these connections be leveraged to strengthen economic ties and mutual benefits for both countries?
Japan and Switzerland have a lot in common. Both economies produce high-quality goods and services. Since 2009, a Free Trade and Economic Partnership Agreement (FTEPA) has been in force. However, this agreement is somewhat outdated and, in our view, urgently needs to be renewed. Japan has concluded a far-reaching free trade agreement with the EU, that goes beyond the scope of the FTEPA with Switzerland. We would welcome it if the two countries would move ahead in an effort to modernize and expand the existing free trade agreement. There is also great potential for research cooperation between Switzerland and Japan.