In a challenging global environment, the Swiss economy almost reached its estimated medium-term growth potential of 2% in 2013. Yet again, growth was mainly driven by the domestic economy. Low interest rates and immigration stimulated demand for consumer goods and real estate, thereby supporting the construction industry in particular. The healthcare, social services and education sectors also developed positively. Corporate service providers such as the IT and consulting sectors benefited from cost and regulatory pressure in their customer sectors. Moderate impetus for growth was generated by the export economy, which gained from the ongoing economic recovery in the key sales markets of Europe and the US. The gap in export growth between the industrial sectors that had become more pronounced in prior years gradually began to close in 2013. The MEM sector halted its downward slide, while there was a deceleration of the strong growth in the pharmaceutical and watch industries.

Investments and Exports to Gain Momentum in 2014
The sound growth posted by the Swiss economy in 2013 is set to continue at a similar level this year, with GDP forecast to grow by about 2%. However, the growth drivers will shift slightly. The domestic economy is likely to shed only a little momentum, whereas growth in investment in plant and equipment and exports will accelerate. The export economy is benefiting from positive global developments, especially the recovery of growth in the euro zone. The uncertainties caused by the euro crisis should continue to decrease, strengthening companies' propensity to invest. Another factor is that the Swiss franc continues to weaken gradually in real terms. The main beneficiaries of these developments are likely to be industrial sectors such as the MEM industry and the foreign-oriented hotel trade, which have been lagging behind until now. As regards the watch industry, the key export markets of Hong Kong and China are showing signs of stabilization. This is why the Credit Suisse economists predict slightly more dynamic growth for watch exports year-on-year in 2014. The pharmaceutical industry will continue to be a major driver of exports for the Swiss economy. However, international price pressure is likely to inhibit this sector's sales growth somewhat during the current year.

Robust Domestic Momentum to Continue in 2014
Immigration in 2014 is set to continue at similar levels to those seen last year, and interest rates are likely to only increase moderately. Growth in consumer spending may prove to be somewhat lower than in 2013 but, in overall terms, the domestic economy will continue to show robust development this year. This will benefit the construction industry in particular, and will also be favorable for construction-related sectors such as real estate, architects and engineers as well as the metal, wood and plastic industries. Immigration will help retailing to achieve robust base growth. Moreover, no further increase in shopping tourism is to be expected. Sectors that are less sensitive to economic cycles such as healthcare, social services and education are set to post moderate growth in 2014. However, the public sector's increased pressure to cut costs is curbing the long-term growth trend to some extent. The consulting sector will again benefit from savings and rationalization measures on the part of corporate clients. The IT sector will be favored by an upturn in investments.

Pharmaceutical Industry and Healthcare Sector Have Best Medium-Term Prospects
Performance in individual sectors is impacted not only by economic fluctuations, but also by structural factors that have a medium- and long-term impact. The Credit Suisse economists compile a yearly medium-term opportunity-risk profile of the main Swiss sectors to focus on these aspects. According to this year's results, the pharmaceutical industry, the healthcare sector, IT and the real estate and consulting sectors have the most favorable prospects in the medium term. Cross-sector developments that positively impact these areas of economic activity include demographic developments, mobility, the trend towards outsourcing and technological progress. The resultant opportunities for the sectors outweigh any risks such as the increasing pressure to cut costs in the healthcare sector, or the shortage of specialist staff. Other sectors with an above-average opportunity-risk profile include social services, the watch industry, medical technology, electrical engineering and the wholesale trade.

Traditional Industrial Sectors and Hospitality on the Losing Side in the Medium Term
There are a number of economic sectors where medium-term opportunities and risks largely balance each other out. In education, for instance, demographic developments are having a positive impact – lifelong learning is growing in importance. By contrast, there is growing pressure to cut costs in the public sector. Telecommunication is benefiting from the heavy demand for wireless communication, boosted by the growing mobility of the population and its workplaces. At the same time, tougher price competition and regulation represent significant risks.

The analysis by the Credit Suisse economists shows that the risks predominate in structurally weak sectors in particular. The hospitality industry, for instance, has a below-average profile. Tourism destinations in Switzerland have to contend with fierce international competition. The rapid spread of online booking portals makes it easier to compare tourism services, creating added global competitive pressure. The metal industry also faces strong international competition and has to cope with comparatively high production costs at Swiss locations. Another factor is the growing competition from alternative materials such as plastics, wood or textiles due to technological advances. The printing and publishing sector is under pressure due to digitalization and yet continuing unwillingness to pay for online content.