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The Swiss Economy in 2012: In the Shadow of the Euro Crisis

Economic Forecasts from Credit Suisse for 2012


Zurich - The euro crisis continues to weigh on markets, with economic momentum in Europe fading unexpectedly quickly. The situation facing the Swiss economy has also deteriorated as a result. Credit Suisse economists are now forecasting growth in Swiss gross domestic product (GDP) of 0.5% (previously 2%) for the Swiss economy in 2012. Compared with the September forecast, prospects for the key destination countries for Swiss products have become decidedly gloomier, and the constant talk of crisis is affecting sentiment. For Switzerland, this means lower exports and capital spending on machinery and equipment. The country’s economy will, however, continue to be supported by private consumption together with activity in the construction sector.

While the US economy has accelerated again slightly following the dip seen in mid-2011, the opposite is occurring in Europe. Most significantly, economic momentum in Germany – Switzerland’s key trading partner – has slowed. At the same time, the partial spillover of the debt crisis to Italy has brought increased volatility on the financial markets, growing tensions on the credit and interbank markets, and falling confidence among households and businesses.

The revised forecast is based on the assumption that budgetary consolidation in the heavily indebted countries, support measures from the European Central Bank (ECB) and International Monetary Fund (IMF), and a drive to implement institutional reforms will prevent the euro zone from sliding into recession. A significant cooling of European growth is no longer avoidable, however. This is likely to be compounded by a slight slowdown in the emerging markets due to the recent implementation of measures designed to curb economic growth, while only a small pick-up in growth can be expected in the US owing to the deadlock over financial policy.

Slower Growth in Europe = Slower Growth in Switzerland
Softer demand from abroad implies that Swiss exports will come to a virtual standstill in 2012 despite the slightly weaker Swiss franc. According to the Credit Suisse forecast, the volume of exports is likely to grow by only 1% in the coming year. The Swiss National Bank (SNB) is playing a key role in removing some of the uncertainty on exchange rates through its creation of a euro/Swiss franc floor.

Capital spending on machinery and equipment is likely to show a retrenchment in 2012 (Credit Suisse forecast: -1.5%). The recent rise in volatility and uncertainty, together with the persistently tight margin situation, is putting a major squeeze on investment activity. Accordingly, the Purchasing Managers’ Index (PMI) (which Credit Suisse compiles in collaboration with, the Swiss Association for Purchasing and Supply Management) suggests that companies are growing more skeptical about prospects for ongoing development: Since the late summer of 2011, they have exercised extreme restraint regarding new hires, while scaling down their inventories.

Domestic Economy Remains Solid, Though the Pace Has Slowed
Activity in the construction sector (1.5%) and private consumption (1.1%) should continue to exert a stabilizing effect in 2012. This is due to structural as well as economic factors. Switzerland’s public finances and companies do not suffer from excess debt, and there are very few home-grown problems that might curb economic progress. On the contrary, interest rates in Switzerland will remain low until at least the end of 2012. In addition, inflation is not an issue in Switzerland at present; pressure on consumer prices is holding up, so purchasing power is safeguarded (inflation in 2012: 0.4%). Finally, immigration is likely to remain strong, meaning an important driver of the growth in consumption will remain in place. By contrast, the constant talk of crisis, together with a deterioration in the labor market situation (unemployment rate in 2012: 3.3%), is increasingly impacting sentiment, and poses certain constraints for the growth in consumption.

Credit Suisse AG
Credit Suisse AG is one of the world’s leading financial services providers and is part of the Credit Suisse group of companies (referred to here as ’Credit Suisse’). As an integrated bank, Credit Suisse offers clients its combined expertise in the areas of private banking, investment banking and asset management. Credit Suisse provides advisory services, comprehensive solutions and innovative products to companies, institutional clients and high-net-worth private clients globally, as well as to retail clients in Switzerland. Credit Suisse is headquartered in Zurich and operates in over 50 countries worldwide. The group employs approximately 50,700 people. The registered shares (CSGN) of Credit Suisse’s parent company, Credit Suisse Group AG, are listed in Switzerland and, in the form of American Depositary Shares (CS), in New York. Further information about Credit Suisse can be found at

This document was produced by and the opinions expressed are those of Credit Suisse as of the date of writing and are subject to change. It has been prepared solely for information purposes and for the use of the recipient. It does not constitute an offer or an invitation by or on behalf of Credit Suisse to any person to buy or sell any security. Any reference to past performance is not necessarily a guide to the future. The information and analysis contained in this publication have been compiled or arrived at from sources believed to be reliable but Credit Suisse does not make any representation as to their accuracy or completeness and does not accept liability for any loss arising from the use hereof.


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