Peak performance

The success story of Switzerland is one of hard work and precision, one that goes beyond world-famous watches, knives and Chocolates.

The Swiss owe their economic success to low inflation, a good investment climate, and a high quality of life, along with sound and transparent public finances.

FX Perroud, a senior adviser to Nestlé, once said that in Switzerland, there is no such thing as a miracle or a free lunch. "Everything has to be earned, so there
is a strong work ethic." Swiss architects, visual artists, graphic designers and Nobel Prize winners in science embody this work ethic and have made the country a leader in ideas-based industries.

Research conducted by The Economic Intelligence Unit in 111 countries on the "quality of life" has revealed that Switzerland is high on its material wellbeing, health, political stability, family and community life, climate, job security, political freedom and its gender equality index.Dynamic outlook.

The Swiss economy is currently in good shape. The upward trend that began in the autumn of 2003 has continued through 2007. Last year the Swiss economy grew by 2.6 per cent, with the number of unemployed falling to below 100,000.

According to reports published by Credit Suisse, private consumption has blossomed into a solid driver of economic activity, while investments in equipment and foreign trade have contributed additional dynamism. Switzerland's manufacturing industry impressed global markets with its products.

Watch making, electrical engineering and plastics in particular were able to increase sales substantially.

The traditional industrial sectors, such as wood, manufacture of basic metals and clothing, also did well. In the tertiary sector, corporate services and IT benefited from the trend towards greater outsourcing of non-core competencies.

The robust economic mood also spread to hotels and catering, as well as to the logistics and travel agency sectors.
Although 2008 started on a bright note, last year's pace is unlikely to be equalled.

The Swiss economy will not be able to decouple itself totally from the negative economic influences stemming from the USA. However, there is no reason to fear a recession in this country in the near future.

More imports

According to the Credit Suisse recession-risk indicator, the risk of recession over the next six months stands at five per cent. Credit Suisse reports that export growth will slacken from 9.8 per cent in 2007 to four per cent in 2008. However, imports should rise again, thanks to the stimulus from the continued strength of the domestic economy.

Therefore, the trade balance will make a positive contribution to the economy as a whole. Private consumption has greatly increased, and consumers' readiness to spend has increased hand-in-hand with their ability to spend.

Going green

Growth in gross salaries has been flanked by relief from health insurance contributions and taxes. The trend for investments in property, plant and equipment is still upward, with above-average capacity utilisation, sound earnings growth and continuing demand from abroad.

In the agricultural sector, Swiss farmers are in a more comfortable financial situation than in previous years. In 2008, demand for agricultural goods, especially from the food manufacturing industry, will continue to rise. The food manufacturing industry has also benefited from the high levels of consumer spending in 2007.

Sales appear to have increased by three per cent. However, purchase prices for raw materials such as cocoa, coffee, wheat and soya beans have recently increased steeply and margins have tended to shrink as a result.

For the clothing industry, 2007 turned out to be one of the best years. The precision instruments industry created more than 5,000 new jobs in 2007. This is the largest absolute increase in jobs in the whole of the Swiss manufacturing industry.

Good sales growth rates are expected in 2008, driven by the demand for medical technology products, measurement and
control instruments and watch exports.

With the pharmaceutical industry currently under pressure (as some of its biggest selling products have recently faced a lot of competition from cheaper imitations), prospects for the chemicals and pharmaceutical industry in 2008 do not seem too bright. The competition to innovate is likely to become tougher.

Switzerland's banking sector, which generates 10 per cent of tax revenues and employs 3 per cent of Switzerland's workforce, enjoys a good reputation internationally and is extremely competitive. The Swiss banks' performance in 2008 will be influenced by developments on the global financial markets.

In the hospitality sector, hotels reported better occupancy rates in 2007, and Credit Suisse predicts that overnight stays
in hotels are likely to increase in 2008. While hotels will profit from higher demand from abroad, restaurants and bars will benefit from local private consumption. Positive growth in the automobile sector continued throughout 2007, and the same growth is expected in 2008.

According to a joint study between the Swiss American Chamber of Commerce and the Boston Consulting Group 2007, there are several areas that Switzerland must address to remain competitive in order to become the best place for international business.

Switzerland must remain competitive on the tax front; it should make it easier for skilled foreign labour to work in the country (major efforts in education will be needed to improve the domestic know-how pool); it should address critical amenities and infrastructure capabilities, such as better airline connections, IT infrastructure and administrative hurdles; and Switzerland should clearly define what
it stands for and make an effort to communicate this reality in a coherent fashion.

Switzerland has a heritage of international involvement. It has always been a catalyst in the development of how nations interact with each other. Translating this heritage in the current context could help Switzerland define a new role in the globalisation race.