How Stable is the Swiss Economy?

How Stable is the Swiss Economy?

 

The economy of Switzerland is one of the most stable economies in the world. This is mainly attributed to the highly developed service sector. Its prestigious banks have played a vital role in giving the country an impressive reputation in the financial sector. That combined with political stability has made Switzerland a safe haven for investors, thus leading to an economy that’s somewhat dependent on foreign investments. The keys to its economic livelihood are trade and industry, thanks to Switzerland’s high labor specialization and small size. That said, the Swiss economy was ranked first in the 2016 Global Innovation Index.

 

Switzerland is located right in the heart of Europe and as such, the European Union is very crucial to the country’s foreign trade. This means that its highly dependent on the economic climate of the neighboring countries. More than 50% of Switzerland’s exports are purchased by countries within the Eurozone, with Germany claiming the largest (20%) exports share. The country also boasts of a very low unemployment rate, which was put at 4.6% towards the end of 2016. It is no wonder many of the citizens enjoy an above average lifestyle.

 

The agricultural sector in Switzerland

The country is not particularly known for its agriculture probably because it is home to many meadows and scenic mountains. Nevertheless, the sector generates up to 100 billion CHF every year, which contributes about 1% to the GDP. It also helps preserve the country’s iconic landscape while contributing 60% of the local food supply. Unfortunately, the quantities of employees as well as farms keep declining, and the sector has largely become dependent on government subsidies.

 

The service sector in Switzerland

This sector is led by the tourism, insurance and banking industries. With the banks employing up to 5.8% of the workforce and contributing 6% to the GDP, they certainly make up a considerable part of the service sector. UBS and Credit Suisse are the most prominent banks in the country, with the former owning assets worth $1.738 billion in 2015. With more than 4000 apprenticeships available in 2016, the banking industry has built a name for itself as one that invests in the Swiss youth.

 

The manufacturing sector in Switzerland

Switzerland is home to globally recognized corporations including Swatch, Rolex and Nestle. Despite that, many of the businesses are small medium-sized enterprises with a workforce of less than 250. These businesses employ up to 70% of the population that’s not employed by the government. And while a large percentage of the workforce is employed in the mechanical and engineering, the largest manufacturing industries in the country, the sector has suffered plenty as a result of the removal of the currency cap on the Swiss franc. This move has also made it more difficult for corporations to export to the Eurozone. Other major sectors include energy, pharmaceutical and chemical industries as well as watch-making.

 

The move by the Swiss National Bank to remove its cap of 1.20 CHF on the exchange rate with the euro on 15th January, 2015 didn’t just hurt the manufacturing sector. The tourism industry suffered a major blow as it deterred travelers in the Eurozone from visiting Switzerland. On the upside, the Swiss franc became stronger and the country was able to avoid recession.