23 May 2018 – The economy of French-speaking Switzerland, like the Swiss economy as a whole, is getting a boost from the synchronized global economic recovery, and the euro’s appreciation against the Swiss franc. 2017 marked a turning point with regard to the EUR/CHF rate. While the Swiss franc had weakened slightly since January 2015, that depreciation gained pace as of mid-2017. Overall, the franc has lost 10% against the euro since the beginning of 2017. Global growth has also gained momentum. In 2017, it reached almost 4% for the first time since the sharp rebound following the 2009 recession. Global growth is synchronized across both emerging markets and industrialized nations alike. Moreover, this positive trend should continue through next year.
In the 11th study on French-speaking Switzerland’s GDP, forecasts by the CREA Institute take account of this favorable macro environment and point to regional growth for 2018 and 2019 well above 1% – the level it had been hovering around from 2015 to 2017.
The region experienced somewhat lackluster growth of 0.9% in 2017 due primarily to a weak services sector in the first half of the year, which a rebound in financial services and the hospitality industry could not fully make up for. However, growth was supported by the machinery, watch-making, chemicals, and pharmaceuticals industries. Those industries benefitted from the improved global outlook and stronger euro.
Economic tailwinds from a variety of industries – across both the secondary and tertiary sectors – should drive the recovery in French-speaking Switzerland in 2018 and 2019. Manufacturing should remain solid given the favorable macro environment. The trend in construction activity, however, is more muted compared with previous years. In the services sector, retailers and wholesalers, business services and real estate, public and semi-public services, financial services, transport and communications, and hospitality should all spur growth.
However, several downside risk factors for growth remain. They include uncertainty surrounding Brexit, geopolitical tensions, the normalization of monetary policy in the US and eventually in the eurozone, and the threat of a trade war. Should such uncertainties become more prevalent, that could weigh on global growth or push up the Swiss franc.
