Swiss industry and economy get affected by Europe’s struggles

Leaving its mark

It was due to come – the global trade war, the euro-zone slowdown and the Germany’s economy being on the brink of the recession have started to leave its mark on the Swiss industry. Only last week the chemical giant EMS-Chemie Holding AG has cited these factors as reasons for fallout. Previously other Swiss companies complained about weak euro-zone economy, among others. Even though Switzerland is not in the European Union, it has very close ties with EUR-countries. The euro-zone is the top trading partner of Switzerland. Additionally, the Swiss export to the German state of Baden Wuerttemberg is huge – bigger than the one to China. With Germany heading towards recession and the whole euro area experiencing significant slowdown in the economy, the Swiss industry is bound to suffer.

Vulnerable, small economy

Small economies with open-minded set are very prone to any disruptions in the international trading market. That is why the effects of upcoming slowdown are already taking its bite at manufacturing data and is felt by Swiss companies. For instance, Interroll Holding AG, a conveyor belt maker that delivers products to Siemens, Zalando or Amazon, recorded an 8% fall in orders in H1 2019. Already mentioned EMS-Chemie Holding AG also experienced a drop in global sales, blaming heavily the generally worse global economic conditions. On the international level major powers, like China and US, dispute and fight over tariffs and as result companies and customers suffer the most. With inventory stock being reduced, especially in the automotive industry, and lower sales in industry the situation is starting to look very uncertain for many small and bigger entities. That trade is getting affected by the global woes could be already noticed while looking at Singapore’s second quarter result. The country has also a small and vulnerable to global turmoil economy, that is heavily relying on trade. It unexpectedly noted a fallout in the Q2 2019 and that is a sure sign that the global economy slowdown is getting worse.

OECD’s forecast

As for forecast for Switzerland GDP this year, the Organization for Economic Cooperation and Development (OECD) revised it in May downward. Now it sees +1 growth in 2019 comparing to earlier +1.6% as announced in November 2018. Additionally, it has lowered the forecast for next year – to +1.5%. If the forecasts turn out to be accurate, the +1% growth would mean a major drop comparing to the previous year, when Swiss GDP was at +2.5% level. CHF price inflations is predicted to be at 0.5% in 2019 and 0.7% in 2020, a modest result but well below the objective of 2% set by the Swiss National Bank. Meanwhile the household consumption should be at 1.2% this year and slightly higher – at 1.5% in 2020. Swiss export is foreseen as stagnated in 2019 but should well recover by the next year and hit +3.4% score. According to OECD to blame for slower economic growth is lack of skilled employees – Switzerland for many years have been relying on foreign or cross-border workers, but still is not sufficient to cover al the workforce needs, especially in scientific, fintech and computer fields. With immigration pace slowing down and Swiss population growing older, it is getting harder and harder for Swiss companies to find skilled workers.

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