Economic studies
Switzerland

Switzerland

Population 8.5 million
GDP 82,848 US$
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Synthesis

major macro economic indicators

  2018 2019 2020 (e) 2021 (f)
GDP growth (%) 3.0 1.1 -3.2 2.3
Inflation (yearly average, %) 0.9 0.4 -0.8 0.1
Budget balance (% GDP) 1.5 1.6 -4.0 -1.6
Current account balance (% GDP) 10.5 10.3 9.6 9.4
Public debt (% GDP) 39.3 40.6 45.9 45.2

(e): Estimate (f): Forecast

STRENGTHS

  • Political, economic and social stability and consensus; role of direct democracy
  • Close relations with the EU
  • International financial centre, headquarters of international groups and organisations
  • Limited sensitivity of exports to foreign exchange due to the emphasis on high technology and quality
  • Very strong public and external accounts
  • European crossroads with excellent communication network

WEAKNESSES

  • Small, open economy (foreign trade = 116% of GDP) and landlocked
  • Swiss franc as a safe-haven currency
  • High dependence on trading and financial services
  • High housing prices with rising vacancy rates
  • Exposure of banks to real estate (85% of domestic loans), two of which account for half of domestic assets
  • Demographic ageing compensated by immigration (33% of the working population is foreign)

RISK ASSESSMENT

Following (relative) resilience, the rebound

The country will return to growth in 2021, after experiencing its worst recession in decades in 2020 because of the consequences of COVID-19. In order to curb the spread of the pandemic, many activities deemed "non-essential" were suspended in the spring and autumn of 2020, leading to an unprecedented drop in activity. However, this fall was less pronounced than in the rest of the region (a 9% fall in GDP between the end of 2019 and mid-2020, compared to -15% in the Eurozone), due to the faster lifting of restrictions and the sectoral structure of the economy. The important chemicals and pharmaceuticals industries (6.4% of GDP in 2019, a third of the manufacturing sector) and the financial sector (10% of GDP, including insurance), relatively less affected, have slightly compensated for the fall in activity in the other main export sectors (metals, jewellery, mechanics, watchmaking). The rebound in activity in 2021 should be driven mainly by household consumption which, despite the ongoing health uncertainty, should consume part of the large precautionary savings built up in 2020, thanks to government support measures (short-time work, aid to the self-employed) that have limited the rise in the unemployment rate (3.3% in October, compared to 2.3% before the crisis) and their loss of purchasing power (-1.1% in the second quarter), despite the collapse in activity. While the uncertain environment will also affect business decisions, investment should rebound, driven by the recovery in domestic and - albeit more gradual - external demand, after having fallen sharply in 2020, despite major public support measures (state-guaranteed loans, postponement of tax and social security payments). Moreover, unless postponed or cancelled at the last minute - a scenario that cannot be totally ruled out at the end of 2020 - the sales of licences generated by the holding of the Olympic Games and Euro 2020 (to the benefit of the IOC and UEFA, which are based in Switzerland), considered as exports of services, should allow a positive contribution from trade.

In line with recent years (key interest rate of -0.75%, unchanged since 2015), the Swiss National Bank has pursued a very accommodative policy in 2020 by intervening on the foreign exchange market and providing liquidity to commercial banks in order to limit the appreciation of the franc, the safe haven value par excellence in times of crisis, to alleviate deflationary pressures and to support activity. For the same reasons, the SNB will continue to pursue this strategy in 2021.

 

Public finances in deficit but still strong

For once, the public accounts will remain in deficit in 2021, after having deteriorated considerably in 2020, due to the successive measures implemented to support households and businesses, at a total cost of over 10% of GDP. Despite the probable extension of certain support measures, such as short-time work (cost estimated at 2% of GDP in 2020), at least in the first part of the year, in connection with the health situation, the deficit is expected to be reduced, particularly thanks to the rebound in tax revenues made possible by the growth in activity. Having consistently recorded - with the exception of 2013 and 2014 - budget surpluses over the previous 15 years, the government has significant fiscal room for manoeuvre. After rising in 2020, public debt is expected to stabilise at a particularly low level for a developed economy. Divided between the Confederation (48% of the total), the cantons (30%) and the municipalities (22%), its cost remained extremely low at the end of 2020 with a negative return (-0.5%) on 10-year issues.
Moreover, the country will continue to show a large current account surplus, thanks to both the balance of goods (7% of GDP in 2019) and the balance of services (3% of GDP, thanks to finance and sports licences). The balance of income is balanced, with revenues from Switzerland's considerable investments abroad offsetting transfers from foreign workers domiciled in Switzerland and cross-border commuters. Switzerland's substantial assets abroad enable the country to have a substantial net foreign asset position (120% of GDP at the end of June 2020), the extent of which varies with stock market prices.

 

Federal Council unchanged despite breakthrough by the Ecologists

Despite their historic breakthrough in the October 2019 elections, the left-wing Ecologists (PES), which on that occasion became the fourth largest political force in the National Council (lower house of the Assembly) with 28 out of 200 seats (+17), were unable to enter the Federal Council (government), whose 7 members were re-elected by the National Council. Despite their electoral setback, the nationalist conservatives (UDC, 53 seats), the Socialist Party (39 seats) and the Liberal Democrats (PLR, 29 seats) each retained two ministerial posts, and the Christian Democrats (PDC, 25 seats) retained their councillor. The attempt by the Greens to enter the Federal Council to replace one of the two PLR councillors, whose weight in the government appeared disproportionate to its electoral result, ran up against the desire for stability in the Assembly, where the centre and the right remain the majority.

 

Last updated: March 2021

Payments

Bills of exchange and cheques are not commonly used in Switzerland, due to prohibitive banking and tax charges. The stamp duty on bills of exchange is 0.75% of the principal amount for domestic bills and 1.5% for international bills.

Commercial operators are particularly demanding regarding the formal validity of cheques and bills of exchange as payment instruments.

Domestic and international payments are commonly made by bank transfer − particularly via the SWIFT electronic network to which the major Swiss banks are connected. SWIFT provides rapid and efficient means of processing of payments, at low cost. 

Debt collection

The Swiss legal system presents technical specificities, notably:

  • The existence of an administrative authority known as the Enforcement and Bankruptcy Office (Office des poursuites et des faillites / Betreibungs und Konkursamt / Ufficio di esecuzione e fallimenti) in each canton, with several offices at local government level which are responsible for executing court orders. Their functions are regulated by federal law. Interested parties can consult or obtain extracts from the Office’s records;
  • A new, unified civil procedure code, created by a commission of experts and approved by the Federal Council, became effective in 2011. This code entailed the repeal of the 26 cantonal procedure laws which were hampering the efficiency of the judicial system. Nevertheless, lawsuits require the assistance of a lawyer who is familiar with the court organisation in the jurisdiction where the case is has been initiated, as well as with the language to be used in the litigation process (French, German or Italian).
Amicable phase

The debt collection process commences with the issuing of a final notice, preferably by recorded delivery (making it possible to accrue overdue interest). The notice requests the debtor to pay, within two weeks, the principal amount due, along with overdue interest calculated at the legal rate of 5% (unless otherwise agreed by the parties).

 

Legal proceedings

If payment is not forthcoming, the creditor can submit a signed and completed petition form (réquisition de poursuite) to the Enforcement and Bankruptcy Office. This Office then serves the debtor with a final order to pay within 20 days, effective from the date of notification of the petition.

While very easy to use by creditors, this procedure nonetheless permits debtors to oppose the order within 10 days of being served, without having to specify grounds. In such cases, without unconditional proof of debt to cancel the debtor’s opposition, the only recourse for creditors is to seek redress through a formal legal action.

Before commencing formal legal action, it is mandatory to proceed to mediation or conciliation before a Justice of Peace. This excludes disputes falling within the jurisdiction of the Commercial Court of Zurich, or cases where both parties have agreed to ignore these proceedings and the claim is higher than CHF 100,000.

Legal proceedings entail initiating a formal (and now unified) procedure, comprising written and oral phases, with the possibility of examining witnesses during a court hearing. These procedures can last from one to three years, depending on the canton.

Conversely, where a creditor holds unconditional proof of debt signed by the debtor (any original document in which the buyer recognises his debt – such as a bill of exchange or a cheque), he may request the temporary lifting of the debtor’s opposition (main levée de l’opposition), without having to appear before the court. This is a simplified procedure, which is quick and relatively easy to obtain, and in which the court’s decision is based upon the documents submitted by the seller.

Once this lifting order has been granted, the creditor has 20 days in which to  refer the case before the judge to obtain the debt’s release (libération de dette) and subsequently obtain an executory order. Once the court hands down a final ruling, the Enforcement and Bankruptcy Office delivers an execution order or a winding-up petition (commination de faillite). This winding-up petition enables the creditor to send the court a request for bankruptcy. Upon receipt of this request, the court will fix a hearing and send a written notice to attend to both parties. If no payment is effected by the debtor and the creditor does not withdraw his request, the court will declare the debtor company bankrupt.

Either a court of first instance or a district court hears legal procedures. Commercial courts, presided over by a panel of professional and non-professional judges, exist in four Germanic cantons: Aargau, Berne, Saint-Gall, and Zürich.

Once an appeal has been lodged with the cantonal court, as a last resort for claims exceeding CHF 30,000, cases are heard by the main federal judicial institution: the Swiss Federal Court (Tribunal fédéral Suisse / Schweizerisches Bundesgericht / Tribunale federale svizzero), which is located in Lausanne.

Enforcement of a Legal Decision

Domestic judgments are enforceable once final. The court typically awards compensatory damages and orders to seize and sell assets. Punitive damages are not granted.

Switzerland’s domestic courts rapidly enforce court decisions falling under the scope of bilateral or multilateral reciprocal recognition and enforcement treaties − such as those issued in EU countries or under the Lugano Convention (which concerns Norway, Denmark & Iceland). Decisions rendered outside Europe are obliged to follow Swiss exequatur proceedings.

Insolvency Proceedings

Restructuring proceedings

Restructuring proceedings (Nachlassverfahren) can be initiated either by the debtor or the creditor. The administrator takes the necessary measures to prepare for the creditor and court approval of the composition agreement. An inventory is then taken, where all assets are valued. Approval of the agreement requires the affirmative vote of a quorum of either a majority of creditors representing two-thirds of the total debtors, or a quarter of the creditors representing three-quarters of the total debt. Once approved, the agreement must be confirmed by the Court. It then becomes valid and binding on all creditors of claims subject to the agreement.

 

Bankruptcy proceedings

A company may be declared bankrupt by the court and placed into bankruptcy proceedings if a creditor has successfully requested this, following a debtor’s declaration that it is insolvent. The court will determine whether summary or ordinary proceedings should be applied, or whether bankruptcy proceedings will go ahead (if the assets are insufficient to cover the expected costs of proceedings). The Receiver then draws up an inventory. Summary proceedings are ordered if the proceeds of the assets are unlikely to cover the costs of ordinary proceedings. In this case, there are no creditors’ meetings and the bankruptcy office will proceed to the liquidation and realisation of the assets, without the participation of the creditors.

If ordinary bankruptcy proceedings apply, the receiver publishes a notice of bankruptcy instructing all creditors and debtors to file their claims and debts within 30 days. This notice invites creditors to a first meeting (where they may appoint a private receiver instead of the state bankruptcy office) and a creditors’ committee. A second meeting will be convened for the commencement or continuation of claims against third parties and to agree the method for realisation of the assets belonging to the bankruptcy estate.

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