What awaits Switzerland: the economic outlook for 2022


Keystone / Christian Beutler

2022 Outlook Series Episode 2:

Supply chain difficulties, return to full employment, inflation risk, franc back at its strongest, new forms of competition for pharma and banks: in this non-exhaustive selection, the economic journalists of swissinfo.ch present seven key developments awaiting the Swiss economy in 2022.

This content was published on December 29, 2021 – 10:17

1) Strong growth, but weakened by Omicron

After a strong recovery this year (+3.5%), Switzerland should once again experience above-average growth in 2022. The State Secretariat of Economic Affairs (SECO) expects a 3% increase in gross domestic product (GDP). Supply problems and new health measures related to the appearance of the Omicron variant are the main factors explaining the slight slowdown in growth.

The labor market has fully recovered from the pandemic. Companies are currently struggling to find skilled workers, especially in IT, architecture, chemical and pharmaceutical industries and mechanical engineering.

Also in the health and social sector, the lack of qualified personnel is above average, according to a recent study by Credit Suisse. According to SECO, the unemployment rate should fall further over the next two years, from 3% in 2021 to 2.4% in 2022 and then to 2.3% in 2023.

2) The Return of the Inflation Scarecrow

In addition to the fear of the appearance of new variants of the corona virus, inflation, which is currently higher than expected in the United States and the eurozone, is also a cause for concern. “I assume that inflation will decrease on its own, even if interest rates remain unchanged,” positive Katrin Assenmacher, head of monetary policy strategy at the European Central Bank (ECB) and former employee of the Swiss National Bank (SNB).

In the United States, however, the signs point to a rise in interest rates. The chairman of the US Central Bank (Fed) Jerome Powell is seen as a proponent of a tight monetary policy. Therefore, one wonders how long the Fed will remain a spectator before tightening the reins of monetary policy, if necessary.

If interest rates rise, the SNB will also come under pressure. If it followed suit, the Swiss franc would become even stronger than it already is. The parity between the franc and the euro even seems to be a likely hypothesis.

3) Swiss pharma faces competition from all sides

A true locomotive of Swiss exports, responsible for more than a third of Swiss GDP growth since 2010, the pharmaceutical industry should continue its boom. But foreign competition is sharpening its weapons. Ireland, Denmark, the San Francisco region and even Singapore are actively trying to encourage the establishment of pharmaceutical companies.

In addition, Swiss giants such as Roche and Novartis face ever-increasing competition from biotechnology newcomers (BioNtech, Moderna) and tech heavyweights such as Google or Amazon, who are betting on artificial intelligence and big data for their place in the lucrative healthcare market.


Keystone / Gaetan Bally

These are all major challenges as health systems come under increasing pressure and governments may question the price of new drugs on the market. Enough to force Swiss pharma to invest massively in research and the acquisition of companies active in personalized medicine, pharma’s next holy grail.

4) Industry regains momentum

Driven by strong demand from China and the United States, the Swiss watch industry has finally forgotten the restrictions of 2020, putting it through one of the worst economic shocks in its history. The improvement should continue in 2022, even if there are still many uncertainties. The dynamics will depend in particular on the speed of the recovery of international tourism, which is essential for the smooth functioning of the luxury industry. The most optimistic specialists expect exports of around 21 to 22 billion francs, close to the absolute record of 2014.

Less known and visible than watchmaking, but much more important in terms of exports and jobs in Switzerland (320,000 jobs), the Machinery, Equipment and Metals Industry (MEM) is also a testament to optimism for the coming months. Order books are full again and sales are rising sharply in this industry, which has long suffered from the effects of the pandemic.

The main concerns relate to supply, with the risk of shortages and rising commodity prices. The franc’s fresh rise against the euro seems to have been consumed by MEM industry leaders, who have taken advantage of the crisis to innovate and thus increase their competitiveness.

5) Banks at risk of a real estate bubble

A rise in interest rates would be good news for investment banks, but not for property owners: paying off their mortgages could become more difficult. The Swiss National Bank and the Financial Markets Authority (FINMA) have repeatedly warned banks of the danger they face with the rapid expansion of their mortgage portfolios.

FINMA now requires banks and other financial companies to report their exposure to climate risks. Sustainable investments promise new sources of income, but only if executed correctly. Non-governmental organizations will be vigilant against any attempt to mislead investors.


Keystone / Melanie Duchene

Finally, banks will no longer be able to ignore technological advances in the financial world. Several digital banks have already carved a niche for themselves in the field of traditional finance. New entrants rely on cryptocurrencies and decentralized finance, which automate transactions with the aim of eliminating middlemen. Blockchain is unlikely to disrupt traditional finance in 2022, but banks have realized that their business model is being challenged by this new technology.

6) Multinationals under pressure

From 2022, large companies in Switzerland must report on the social and environmental impact of their activities. From 2023, companies in high-risk sectors, such as mining, will also be required to conduct due diligence on child labor and conflict mineral risks.

Supporters of the Responsible Business Initiative, which was narrowly defeated in a popular vote in 2020, say the new law does not go far enough and will continue to push for greater corporate accountability for their impact abroad. The European Commission is expected to make a long-awaited decision on responsible business in 2022, which could go beyond Swiss law.

Multinationals will also be tested in other contexts, such as China and Myanmar, where widespread human rights violations are reported.

7) Very solid public finances

Healthy public finances are also a sign of a robust economy. After diving into the red for the past two years, the Confederation’s budget should return to some normalcy by 2022. The extraordinary expenditure of 40 billion francs incurred to deal with the health crisis will have to be written off in ten years, at no cost to the taxpayer. a cent. The government plans to use the National Bank’s budget surpluses and profits to pay off the debt.

The long-term outlook is also very favourable. Despite an increase in training expenditure and costs associated with an aging population, the experts at the ConfederationExternal link predict that the Swiss public debt (Confederation, cantons, municipalities) will rise in the worst case from 30% to 51% of GDP in 2050.

By comparison, the eurozone average debt-to-GDP ratio is already close to 100% of GDP today. This state swell should not be a problem for Switzerland, as the prosperity of the population will also “be clearly increasing” during this period, according to Confederation economists.

Outlook Series for 2022

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