Economic outlook

Switzerland: The Swiss MEM engine springs into life

| Author / Editor: Susanne Reinshagen / Franziska Breunig

Good forecasts at the BAK Autumn Conference in Basel: The Swiss economy should grow by 2.3 per cent next year. In particular the MEM industry is profiting from the improved export conditions.
Good forecasts at the BAK Autumn Conference in Basel: The Swiss economy should grow by 2.3 per cent next year. In particular the MEM industry is profiting from the improved export conditions. (Source: Sergio Caré)

According to the Swiss economic institute BAK Economics, the Swiss economy should grow by 2.3% next year. In particular the MEM industries (mechanical engineering, electronics and metals industry) will profit from improved conditions for exports.

In view of the good morale amongst Swiss economic stakeholders and the upwards trend in industry, we can count on the Swiss domestic economic situation growing again. In the Eurozone in particular, the most important Swiss trading partner, there are signs of growth. In addition the most recent devaluation of the Franc against the Euro is having a positive effect on Swiss exports and corporate investment activity. For this reason BAK Economics forecasts a rise of 1.0 per cent in gross domestic product for 2017. We can count on even more in 2018: 2.3 per cent.

Rising exports of goods

And so the satisfactory development of goods exports in 2016 continues. Thanks to the growth of investment activity domestically as well as the improved global economic situation with growing markets, the capital goods industry will support the Swiss economy in the current year. An industry-wide recovery is looming in 2018. Above all the MEM industry (mechanical engineering, electronics and metals industry) will emerge from this positively and will lead to increased production capacities.

Crisis overcome, however...

In spite of the optimistic outlook, instability factors remain for the medium-term. One of these is China, which continues to grow on credit. According to Tobias Straumann, speaker at the BAK Autumn Conference and a Professor at the University of Zurich, the Chinese dragon threatens to go into descent, even into Japanisation. The debt / GDP ratio rose from 120 to 225 per cent during the last ten years. Straumann, who explained the «Financial Crisis – Ten Years On» to those people present, predicts a financial repression lasting 30 years, as occurred following the Second World War, and which lasted 35 years. Economic scientists use the term financial repression to describe a reduction of national debt through inflation (demonetisation). In order for this to succeed, a low rate of interest is necessary at the same time which lies below the rate of inflation. In this way, the ECB will keep interest low in the coming months according to Straumann, if not even for years. Likewise in this way there is no other option for the SNB.

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