Ekonomske analize
Switzerland

Switzerland

Population 8.7 million
GDP 92,249 US$
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Synthesis

major macro economic indicators

  2020 2021 2022 (e) 2023 (p)
GDP growth (%) -2.4 4.2 2.1 1.1
Inflation (yearly average, %) -0.7 0.6 2.8 3.2
Budget balance (% GDP) -3.1 -0.5 -0.3 0.2
Current account balance (% GDP) 0.4 8.8 10.1 8.3
Public debt (% GDP) 43.8 41.2 42.3 42.7

(e): Estimate (f): Forecast

STRENGTHS

  • Political, economic and social stability and consensus; role of direct democracy
  • Close relations with the EU
  • International financial centre, headquarters of international groups and organisations
  • Limited sensitivity of exports to foreign exchange due to the emphasis on high technology and quality
  • Very strong public and external accounts
  • European crossroads with excellent communication network

WEAKNESSES

  • Small, open economy (foreign trade = 116% of GDP) and landlocked
  • Swiss franc as a safe-haven currency
  • High housing prices with rising vacancy rates
  • Exposure of banks to real estate (85% of domestic loans), two of which account for half of domestic assets
  • Demographic ageing compensated by immigration

RISK ASSESSMENT

Better economic performance than neighbours due to lower energy dependence

The Swiss economy proved to be more resilient in 2022 and has a moderately better outlook for 2023 than its Western European neighbours. One reason for this development is a lower inflation dynamic, partly due to a lower energy dependence on external sources, particularly Russia. Natural gas has a share of “just” 15% of the energy consumption in Switzerland (in 2020), and serves to heat households (20% of the total) and for industrial use. While Switzerland is getting its gas mainly from Germany, the Netherlands, Italy and France, a big part of that (43% in 2021) originated in Russia. Its gas providers have reacted to the stop of gas deliveries from Russia with the adoption of alternative gas sources, e.g. an increase of LNG imports from the US, higher imports from Belgium and Norway, and new contracts with Algeria and Qatar. Part of that secured the gas-supply for Switzerland. The Swiss electricity production is not affected by gas shortages as it is produced by hydropower and nuclear energy. For 2023, the outlook for the energy supply is relatively positive, given the circumstances. While Switzerland has no gas-storage of its own, it has contracted storage capacities in France, which were around 50% filled at mid-February 2023 compared to 28% in February 2022. Also, precipitations in the winter 2022/23 were strong, so water reservoirs are filled. This has led to some easing in energy prices. Indeed, the overall price tension in Switzerland was low in 2022 compared with other Western European countries. Besides of the relatively low electricity prices, another reason was the strong Swiss Franc (CHF), which appreciated particularly against the Euro. As 56% of all Swiss goods imports come from the EU, the appreciation of the domestic currency has helped to cushion the impact from the higher Euro-prices abroad. Furthermore, many parts of the CPI and other costs that are not part of the official inflation rate are adapted only once, at the beginning of the year. The mortgage reference interest rate (“hypothekarischer Referenzzinssatz”), for example, will be probably increased in June or September 2023 for the first time since its creation in 2008, raising prevailing rents that are connected to it. In the spring-settlement for ancillary costs (within the rent), the higher heating costs of this winter will be seen too. Finally, the premiums for the basic health insurance increased on average by 6.6% from the beginning of 2023. These different factors have already led to stronger consumer price tensions in January and will remain for the rest of 2023. The resulting purchasing power losses will be partly balanced out via an increase in pensions and nominal wages (around 2.2% YoY). Nevertheless, private consumption growth as well as private investment should be cushioned by this development. The Swiss National Bank (SNB) already increased its key interest rate by 225 basis points between early 2022 and spring 2023 to 1.5%. Given that inflation, after a short downward-trend in the second half of 2022, is again rising in early 2023 and remaining far above the 2% target, further cautious steps could be in the pipeline for 2023. Finally, foreign trade should remain a positive driver for economic growth as many export products are in the luxury (watches) and high tech (pharma, medical, precision, etc.) segments, and therefore less dependent on the economic cycle. This excludes the big Swiss commodity traders, who should profit from the currently strong global demand for commodities too.

 

Public accounts back in balance

After three years of deficits, public finances should return to a tiny surplus, as the debt brake (accounts must be balanced out via the complete economic cycle) is in effect again and asking for an austerity policy. This rebalancing will be achieved by a further rebound in tax revenue (3.0% increase according to the 2023 budget). Public expenditures, however, will increase a bit, notably due to higher pension payments. Public debt should remain roughly unchanged and moderate.

The country consistently posts a large current account surplus, thanks to the considerable balance of goods surplus (in 2022: 15% of GDP). Despite finance and insurance as well as sport licenses (e.g. the FIFA and IOC) playing an important role in the Swiss economy and external accounts, the services trade balance as well as the primary income one (e.g. income from financial market operations abroad) are structurally in a small deficit. The structural balance of income transfer deficit adds to it, which is a result of foreign workers that are working in Switzerland who send part of their income home.

Swiss assets abroad allow the country to have a substantial positive net foreign investment position (95% of GDP at the end of September 2022), the size of which varies with stock market prices and the USD/CHF exchange rate.

 

Some changes in the Federal Council – all eyes on the election result of the Greens in October

At the start of 2023, the personnel composition of the Federal Council (= government) changed after Ueli Maurer (from the national conservative SVP was replaced by Albert Rösti (SVP) and Simonetta Sommaruga by Elisabeth Baume-Schneider (both social-democratic SP).

With these newcomers came also a change in the distribution of portfolios between the parties. Mr. Rösti is now leading the energy ministry taking over from the SP. Given that Rösti is known as a lobbyist for automobiles and fuels, it is expected that Switzerland will not make strong progress in coping with the effects of climate change. Furthermore, the finance resort changed from the SVP to the liberal FDP, which could lead to a more restrictive fiscal policy. Nevertheless, big political changes are not expected due to the Swiss tradition of political consensus.

The main political highlight of the year should be the parliamentary election in October 2023. Since 1959, the so-called magic formula sees the first three parties in the results get two seats in the Federal council and the fourth party one seat. In the last election in 2019, the left-wing environmentalists (Greens) came out in the fourth place but did not get into the Council. The Council’s partisan composition only changes, if the candidate party finishes in the top four in two elections in a row. All eyes are now on this year’s election. In the current polls, however, the greens are back on fifth place behind the Christian-democratic Centre party (who still holds 1 seat in the Federal council). As the difference between Centre and Greens is only one to two percentage points, the race will be very tight.

A new critical topic is the situation of Switzerland within the war in Ukraine, given its long tradition of neutrality. Switzerland applied the EU sanctions against Russia because of its breach of international laws. However, when it comes to the Swiss military industry, neutrality is for now still in place, as by law Switzerland is not allowed to sell arms to any nation at war or to sell them for the purpose of re-export in a conflict. This led to a heated debate in Switzerland, as main producers say that it would have a big damage on the relationship with critical customers of the Swiss military industry.

 

Last updated: April 2023

Payments

Bills of exchange and cheques are not commonly used in Switzerland, due to prohibitive banking and tax charges. The stamp duty on bills of exchange is 0.75% of the principal amount for domestic bills and 1.5% for international bills.

Commercial operators are particularly demanding regarding the formal validity of cheques and bills of exchange as payment instruments.

Domestic and international payments are commonly made by bank transfer − particularly via the SWIFT electronic network to which the major Swiss banks are connected. SWIFT provides rapid and efficient means of processing of payments, at low cost. 

Debt collection

The Swiss legal system presents technical specificities, notably:

  • The existence of an administrative authority known as the Enforcement and Bankruptcy Office (Office des poursuites et des faillites / Betreibungs und Konkursamt / Ufficio di esecuzione e fallimenti) in each canton, with several offices at local government level which are responsible for executing court orders. Their functions are regulated by federal law. Interested parties can consult or obtain extracts from the Office’s records;
  • A new, unified civil procedure code, created by a commission of experts and approved by the Federal Council, became effective in 2011. This code entailed the repeal of the 26 cantonal procedure laws which were hampering the efficiency of the judicial system. Nevertheless, lawsuits require the assistance of a lawyer who is familiar with the court organisation in the jurisdiction where the case is has been initiated, as well as with the language to be used in the litigation process (French, German or Italian).
Amicable phase

The debt collection process commences with the issuing of a final notice, preferably by recorded delivery (making it possible to accrue overdue interest). The notice requests the debtor to pay, within two weeks, the principal amount due, along with overdue interest calculated at the legal rate of 5% (unless otherwise agreed by the parties).

 

Legal proceedings

If payment is not forthcoming, the creditor can submit a signed and completed petition form (réquisition de poursuite) to the Enforcement and Bankruptcy Office. This Office then serves the debtor with a final order to pay within 20 days, effective from the date of notification of the petition.

While very easy to use by creditors, this procedure nonetheless permits debtors to oppose the order within 10 days of being served, without having to specify grounds. In such cases, without unconditional proof of debt to cancel the debtor’s opposition, the only recourse for creditors is to seek redress through a formal legal action.

Before commencing formal legal action, it is mandatory to proceed to mediation or conciliation before a Justice of Peace. This excludes disputes falling within the jurisdiction of the Commercial Court of Zurich, or cases where both parties have agreed to ignore these proceedings and the claim is higher than CHF 100,000.

Legal proceedings entail initiating a formal (and now unified) procedure, comprising written and oral phases, with the possibility of examining witnesses during a court hearing. These procedures can last from one to three years, depending on the canton.

Conversely, where a creditor holds unconditional proof of debt signed by the debtor (any original document in which the buyer recognises his debt – such as a bill of exchange or a cheque), he may request the temporary lifting of the debtor’s opposition (main levée de l’opposition), without having to appear before the court. This is a simplified procedure, which is quick and relatively easy to obtain, and in which the court’s decision is based upon the documents submitted by the seller.

Once this lifting order has been granted, the creditor has 20 days in which to  refer the case before the judge to obtain the debt’s release (libération de dette) and subsequently obtain an executory order. Once the court hands down a final ruling, the Enforcement and Bankruptcy Office delivers an execution order or a winding-up petition (commination de faillite). This winding-up petition enables the creditor to send the court a request for bankruptcy. Upon receipt of this request, the court will fix a hearing and send a written notice to attend to both parties. If no payment is effected by the debtor and the creditor does not withdraw his request, the court will declare the debtor company bankrupt.

Either a court of first instance or a district court hears legal procedures. Commercial courts, presided over by a panel of professional and non-professional judges, exist in four Germanic cantons: Aargau, Berne, Saint-Gall, and Zürich.

Once an appeal has been lodged with the cantonal court, as a last resort for claims exceeding CHF 30,000, cases are heard by the main federal judicial institution: the Swiss Federal Court (Tribunal fédéral Suisse / Schweizerisches Bundesgericht / Tribunale federale svizzero), which is located in Lausanne.

Enforcement of a Legal Decision

Domestic judgments are enforceable once final. The court typically awards compensatory damages and orders to seize and sell assets. Punitive damages are not granted.

Switzerland’s domestic courts rapidly enforce court decisions falling under the scope of bilateral or multilateral reciprocal recognition and enforcement treaties − such as those issued in EU countries or under the Lugano Convention (which concerns Norway, Denmark & Iceland). Decisions rendered outside Europe are obliged to follow Swiss exequatur proceedings.

Insolvency Proceedings

Restructuring proceedings

Restructuring proceedings (Nachlassverfahren) can be initiated either by the debtor or the creditor. The administrator takes the necessary measures to prepare for the creditor and court approval of the composition agreement. An inventory is then taken, where all assets are valued. Approval of the agreement requires the affirmative vote of a quorum of either a majority of creditors representing two-thirds of the total debtors, or a quarter of the creditors representing three-quarters of the total debt. Once approved, the agreement must be confirmed by the Court. It then becomes valid and binding on all creditors of claims subject to the agreement.

 

Bankruptcy proceedings

A company may be declared bankrupt by the court and placed into bankruptcy proceedings if a creditor has successfully requested this, following a debtor’s declaration that it is insolvent. The court will determine whether summary or ordinary proceedings should be applied, or whether bankruptcy proceedings will go ahead (if the assets are insufficient to cover the expected costs of proceedings). The Receiver then draws up an inventory. Summary proceedings are ordered if the proceeds of the assets are unlikely to cover the costs of ordinary proceedings. In this case, there are no creditors’ meetings and the bankruptcy office will proceed to the liquidation and realisation of the assets, without the participation of the creditors.

If ordinary bankruptcy proceedings apply, the receiver publishes a notice of bankruptcy instructing all creditors and debtors to file their claims and debts within 30 days. This notice invites creditors to a first meeting (where they may appoint a private receiver instead of the state bankruptcy office) and a creditors’ committee. A second meeting will be convened for the commencement or continuation of claims against third parties and to agree the method for realisation of the assets belonging to the bankruptcy estate.

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