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Switzerland in flux - Swiss industries as the building blocks for growth

Credit Suisse study on the sectors of the Swiss economyThe Swiss economy is in a state of flux, as sectoral comparisons make particularly evident. In their latest study, Credit Suisse economists analyze the persistently sluggish trend in economic growth in Switzerland since the early 1990s from the point of view of individual sectors. Increasing labor productivity and building on existing strengths such as technological performance and capacity for innovation are the main requirements for overcoming the country's problem of weak growth. Forecasts extending to 2010 show that high-tech industries and knowledge-based services are the segments most likely to emerge as future winners.

Although the process of structural change accelerated throughout the 1990s, Switzerland's real potential growth has now slumped to 1.2%, according to estimates by Credit Suisse economists. Globalization has not only resulted in fiercer international competition, it is also giving rise to new opportunities. Switzerland still ranks among the top export-driven nations, and the Swiss brand remains a byword for quality around the globe. However, maintaining its pole position in quality competition has become increasingly difficult as other countries are beginning to catch up and compete head-on with Switzerland.

Large differential in industry and manufacturing
In Switzerland, the Primary Sector (agriculture) and the Secondary Sector (industrial and manufacturing sector and construction) have dwindled in significance over the last four decades, while the Tertiary Sector (services) has continued to grow in importance. However, a detailed analysis of economic events in the 1990s puts this picture into perspective somewhat, since the industrial and manufacturing sectors come out surprisingly well in a systematic overall rating based on seven quantitative criteria. From 1991 to 2003, for example, these two sectors made the largest contribution to real growth in gross domestic product (GDP).

But not every branch of manufacturing and industry advanced during the period under review. Temporary economic highs cannot disguise the fact that several industrial segments - such as textiles and clothing, paper and printing and parts of the metal industry - are in decline. By contrast, a number of export-driven segments are capitalizing on demand from abroad, which is outpacing domestic demand. These include pharmaceuticals, the medtech and watchmaking industries, as well as selected engineering and electronics segments. Innovation, flexibility and a focus on high-tech niche markets have done much to help these segments make their presence felt on the global stage.

Marked growth in the service sector
Marked growth across the entire service sector reflects the shift toward a global "knowledge economy". Banking and insurance come out top in the overall rating by the Credit Suisse economists. Public administration, occupying third position following its expansion in the 1990s, and health and social services in sixth place, also emerged as winners. The losers tend to include those sectors that still focus on the somewhat sluggish domestic economy. The fact that competition is also heating up on the domestic market is being felt most keenly by retailing and the automotive sales and repairs' sector. These segments, which turned in a slight negative contribution to growth in the 1990s, saw a downturn in employment levels.

Forecast extending to 2010 and impact of the megatrends
An ageing population - and one that is ever more health-conscious, enjoys increased mobility and is keen to experience life and make the most of its leisure activities - will have a major impact on the economic environment of the future. The ability to anticipate these megatrends and to quickly turn knowledge and research findings into marketable products or solutions will become key success factors. The quantitative baseline scenario extending to 2010 presented in the Credit Suisse study is rounded out by a qualitative assessment of these growth factors. Not all of the megatrends are relevant to every branch of the economy. Sectors such as financial services, chemicals, pharmaceuticals and plastics, as well as corporate services, stand to benefit most. By contrast, agriculture and the food industry, as well as construction, are not likely to feel any great impact.

Turning knowledge into growth
To summarize, the scenarios developed by economists at Credit Suisse show that several sectors of the Swiss economy clearly stand to profit from the megatrends identified. But there remain a number of sectors that either tend to be tied to specific locations or are isolated from current trends, and whose growth potential must therefore be rated as less promising. For Switzerland to overcome its growth problems it must boost its labor productivity significantly and also continue to build on the country's strengths in the fields of technological performance and innovation. In other words, it must "turn knowledge into growth".