Confidence low despite German economic gains

Keystone

Swiss firms hold little hope that their fortunes will improve in the near future despite encouraging signs of growth from large economies such as Germany and Japan.

A recent survey showed little optimism for the remainder of the year from most industry segments, in stark contrast to surprisingly upbeat signals sent out at the start of the global recession.

Economic figures released in the last two weeks have also shown France and Hong Kong emerging from recession with positive gross economic product (GDP) growth in the second quarter of this year.

The Swiss State Secretariat for Economic Affairs said earlier this week that the economy had bottomed out, with expectations of growth from now on. The only drag on a revival was a predicted rise in unemployment well into 2010.

However, a survey of 11,000 enterprises in Switzerland by the KOF Swiss Economic Institute painted a bleaker picture, with few sectors predicting a boost in fortunes any time soon.

The results of the survey, released in Zurich on Friday, revealed an expectation that conditions would remain negative for the remainder of 2009, although not quite as severe as in the first half of the year.

Better than zero

The construction, retail, banking and tourist related industries remained pessimistic, but on the plus side, exporters expected demand to pick up in the next six months.

“We do see signs that the worst is over, but we are still sliding down the slippery slope,” KOF head Jan-Egbert Sturm told swissinfo.ch. “The export industry does not expect demand to fall any further, but it is basically starting from a zero point. Domestic firms will continue to go through a tough stage.”

Sturm also drew little comfort from the encouraging economic data from other countries, many of whom are large markets for Swiss exporters.

“If the world economy is reviving then the Swiss export-driven economy will benefit from that. But if you look at the countries that have just reported slightly positive growth rates, they had tremendously low growth over the winter, so they are coming from basically nowhere,” he added.

Bank Sarasin economist Alessandro Bee was slightly more positive about the short-term prospects for Swiss companies.

Bee predicted a marginal GDP growth rate in Switzerland in the second half of the year, driven by higher demand for exports and the consequent increase in industrial production. But he sounded caution about the prospects of a sustained and unbroken climb out of a recession.

Payback time

“In the medium-term we see a lot of structural problems for the global economy that will take effect in the second half of 2010 and the start of 2011,” Bee told swissinfo.ch.

“In the next two years, GDP growth will outstrip that of credit and that will limit the growth potential of the entire economy. The various stimulus packages will also lose their impact by 2011 and governments will have to claw back the money they have spent, possibly through tax rises.”

But Bee believed that, unlike the recession of the 1990s which took a long time to work its way out of the system, the foundations of the Swiss economy are stronger this time around.

“The domestic structural problems, such as the depressed housing market, are not in evidence this time around. All of the problems that have afflicted Switzerland originated abroad, even in the financial sector,” he said.

Matthew Allen, swissinfo.ch in Zurich

Small firms pessimistic

A survey of Swiss small- and medium-sized enterprises (SMEs), conducted by UBS bank and the Swiss Trade Association, also reveals pessimism among this vital sector of the economy.

The survey of SME sentiment, published on Thursday, showed expectations continuing to slide for prices, employment, profits and cash flow.

The 1,300 companies surveyed expected conditions to remain depressed in the third quarter of 2009, despite some signs that the general global economy would pick up.

“The outlook remains gloomy and according to estimates of those surveyed, the business climate is expected to remain considerably negative,” the report’s authors stated.

Only SMEs in the service sector reported slightly better results in the first half of the year, with retail, building and tourism firms still in the doldrums.