The Swiss economy is not getting on track after a strong start to the 2023 year. Export-oriented sectors, for example, are losing momentum due to weak external demand. The domestic service sector is still holding, although private consumption is only increasing moderately. The under-average development is generally caused by the persistently difficult international environment and the associated stagnation of industrial added value.
Good Figures in the pharmaceutical and government Sectors
However, not all sectors of the industry, which in the second quarter experienced a severe recession, are experiencing a gloomy situation. The chemical and pharmaceutical sectors are not so heavily dependent on the ups and downs of the economy. Thus, this area was able to increase by 1.2%. On the other hand, the mechanical and metallurgical industries were less successful. These sectors are increasingly feeling the effects of weakening international demand. Nevertheless, exports of goods grew strongly by 6.2%, also supported by merchanting.
The picture in the service sector is also different. Health and social services increased significantly (+0.7%). The hospitality industry, on the other hand, had to register a drop of 3.7% for the first time in more than two years. Thus, the main drivers are sectors close to the state. Accordingly, government consumption increased by 0.5%, which is equivalent to the historical average. On the contrary, private consumption only increased by 0.2%. In particular, heating requirements were significantly lower due to the warmest September since measurements began.
Developments in other consumer sectors were mixed. Construction investment (+0.2%) was weak; value added in the construction industry (-0.3%) fell slightly due to declining sales in building construction. Investment in equipment (-1.1%) fell for the second quarter in a row. Although investment in research and development, electronic goods and vehicles increased, less was invested in most other categories.
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Driving Population Growth
The good news is that the Swiss economy has escaped a recession this year. Gross domestic product (GDP) shrank slightly in the second quarter but was able to increase slightly again in the third quarter. To create a recession, there must be two consecutive quarters of falling GDP.
Against this background, growth is expected to be just under 1% this year. That positive result is due mainly to the persistently high population growth, which is expected to be around 1.3% in 2023. Because the population is growing more than the economy, GDP per capita is shrinking—the measure that shows what the individual gets from growth. The growth of Switzerland in 2023 is therefore primarily a growth in breadth.
If you put the performance in an international context, it turns out that Switzerland is currently less dynamic than the US. However, in the USA, most economists expect a marked slowdown in growth or even a recession in the coming year. The Swiss economy is developing more favourably than in the European suburbs, where the EU economy stagnated in the third quarter and the eurozone economy even shrank slightly.
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