Wirtschaftsanalysen
Switzerland

Switzerland

Population 8.6 million
GDP 87,367 US$
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Synthesis

major macro economic indicators

  2019 2020 2021 (e) 2022 (f)
GDP growth (%) 1.2 -2.5 3.5 2.3
Inflation (yearly average, %) 0.4 -0.7 0.6 0.7
Budget balance (% GDP) 1.3 -2.8 -2.3 -0.7
Current account balance (% GDP) 6.7 3.8 7.0 7.2
Public debt (% GDP) 39.8 42.4 42.9 42.0

(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 dependence on trading and financial services
  • High housing prices with rising vacancy rates
  • Exposure of banks to real estate (85% of domestic loans); two banks account for half of domestic assets
  • Demographic ageing compensated by immigration (33% of the working population is foreign)
  • Failure of negotiations with the EU on the institutional framework agreement to replace the existing bilateral agreements, which will block any new access to the single market

RISK ASSESSMENT

Continued recovery, driven by domestic demand

The economy was relatively resilient throughout the pandemic, thanks to its specialisation in the financial sector (10% of GDP including insurance) and in the chemical and pharmaceutical industries (6.4% of GDP in 2019, one-third of the manufacturing sector). Thus, in mid-2021, GDP was only 0.5% below its pre-crisis level, compared with 3% in France and Germany. In 2022, activity should continue to catch up on the back of strong domestic demand. While public spending is set to decrease (by 4.8% according to the 2021 budget), household consumption will be the main driver of the recovery. The vaccination of much of the population (66% of people were fully vaccinated in November 2021) should make it possible to avoid having to introduce restrictions that would undermine economic activity. This should therefore encourage the consumption of savings built up during the crisis – the savings rate stood at 19.9% of gross disposable income at the end of 2020, compared with 13.3% a year earlier. However, the recovery will be hampered by supply difficulties and the production capacity of companies, whose utilisation rate hit the highest reading in over a decade at the end of 2021 (85%), which will prompt them to continue investing in 2022. Furthermore, while imports will accelerate in line with domestic demand, trade should continue to make a positive contribution to growth, notably thanks to licence sales generated in 2022 in connection with staging the Winter Olympics and the Soccer World Cup, which are considered to be services exports (these sales earn revenue for the IOC and FIFA, which are based in Switzerland).

 
In line with recent years (key rate unchanged at -0.75% since 2015), and despite the slight rebound in inflation at the end of 2021, the Swiss National Bank should continue its ultra-accommodative policy in 2022 by means of targeted interventions on the foreign exchange market and the provision of liquidity to commercial banks, in order to limit the appreciation of the Swiss franc and support activity.

 

Public accounts back in balance, but the international tax agreement is a challenge 

After two years of deficits due to the collapse in activity and support measures, public finances will recover in 2022, and could even return to a surplus, as in the 15 years preceding the pandemic, with the exception of 2013 and 2014. This rebalancing will be achieved by both a rebound in tax revenue (3.3% increase according to the 2022 budget), thanks to strong performances by companies in the financial and pharmaceutical sectors, and by the scrapping of support measures. Public debt, which should thus resume its downward trend in 2022, is particularly low for a developed economy, with ten-year yields in negative territory (-0.2%) at the end of 2021. However, having signed, in October 2021, the international agreement that sets the minimum tax rate on corporate profits at 15%, which is higher than the rate in force in 18 of the country’s 26 cantons, Switzerland will have to address attractiveness challenges in the medium-term (most likely 2023). Accordingly, the Federal Council has announced that a tax reform plan will be drawn up in the first quarter of 2022.

 
The country consistently posts a large current account surplus, thanks to the balance of goods and, to a lesser extent, services (thanks to finance and sports licences). This substantial trade surplus (10% of GDP in 2019) largely offsets the structural deficit in the income balance, which is attributable in particular to transfers by foreign workers domiciled in Switzerland and cross-border commuters. Swiss assets abroad allow the country to have a substantial net foreign asset position (96% of GDP at the end of June 2021), the size of which varies with stock market prices and the USD/CHF exchange rate.

 

Debate on party representation in the Federal Council likely to return in 2023

Despite the historic breakthrough achieved by left-wing environmentalists (Greens, which increased their share from 7% to 13% of the vote) in the October 2019 elections, the composition of the Federal Council (government) remained unchanged, with all seven members re-elected by the National Council (lower house of the Federal Assembly). Despite losing ground in the election, nationalist conservatives (SVP, 26%), the Socialist Party (17%) and the liberal democrats (FDP, 15%) each retained two ministerial posts, while the Christian democrats (CVP, 11%) held onto their councillor. The Greens' attempt to enter the Federal Council by replacing one of the two councillors provided by the FDP, whose government representation appeared disproportionate to the party’s electoral result, came up against a desire for stability in the assembly, where the centre and right continue to hold the majority. At mid-term, polls confirmed that support for the FDP was slipping, with the party receiving only 13% of voting intentions for the October 2023 elections, i.e. the same as the Greens and The Centre (a merger of the CVP and the centre-right BDP). If these poll findings are borne out in the next elections, this would definitely rekindle the debate on party representation in the Federal Council, especially with the rise of the Green Liberal Party (10%, up 2 points) adding to the evidence of the environmentalist movement’s growing momentum.

 

Last updated: February 2022

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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