MAHATMA EDUCATION SOCIETYSPILLAI COLLEGE OF ARTS, COMMERCE AND
SCIENCENEW PANVEL
A PROJECTON
Balance Of Payments of Switzerland in the subject Economics of
Global Trade & Finance
SUBMITTED TOUNIVERSITY OF MUMBAI, FOR SEMESTER-1 OFMASTER OF
COMMERCEBY,AFRA S. MUKADAMMCOM Part-1, 3821UNDER THE GUIDANCE
OFPROF. RINKOO SHANTNU MAAMYEAR: 2013-2014
DECLARATION BY THE STUDENT
I Afra S. Mukadam student of Mcom Part-1, Roll number, 3821
hereby declare that the project for the Paper Economics of Global
Trade & Finance titled,Balance of Payments of
SwitzerlandSubmitted by me for Semester 1 during the academic year
2013 2014, is based on actual work carried out by me under the
guidance and supervision of Prof. Rinkoo Shantnu.I further state
that this work is original and not submitted anywhere else for any
examination.
EVALUATION CERTIFICATEThis is to certify that the undersigned
have assessed and evaluated the project on Balance of Payments of
Switzerland submitted by Afra S.Mukadam Student of MCom Part-1.This
subject is original to the best of our knowledge and has been
accepted for Internal Assessment.
Internal Examiner External Examiner PrincipalProf. Rinkoo
Shantnu Daphne PillaiPILLAI COLLEGE OF ARTS, COMMERCE AND
SCIENCENAME OF THE STUDENTCLASSDIVISIONROLL NUMBER
FIRST NAME: AfraMCom Part-1
3821
FATHERS NAME: Sharfuddin
SURNAME: Mukadam
Subject: Economics of Global Trade & Finance
Topic for the Project: Balance of Payments of
Switzerland.ParticularsMarks AwardedSignature
DOCUMENTATIONInternal Examiner(Out of 10 marks)
External Examiner(Out of 10 marks)
Presentation(Out of 10 marks)
Viva and Interaction(Out of 10 marks)
TOTAL MARKS (Out of 10 marks)
INDEXS.NoParticularsPg No.
1.Chapter 1 - Introduction6 8
2.Chapter 2 Economy of Switzerland9 11
3.Chapter 3 - Balance of Payments in Switzerland12 16
4.Chapter 4 Comparison of Last Five Years17 20
5.Chapter 5 - Conclusion21 24
CHAPTER 1 - INTRODUCTION
Balance of payments(BoP) accounts are an accounting record of
all monetary transactions between a country and the rest of the
world.[1]These transactions include payments for the
country'sexportsandimportsofgoods,services,financial capital,
andfinancial transfers. The BOP accounts summarize international
transactions for a specific period, usually a year, and are
prepared in a single currency, typically the domestic currency for
the country concerned. Sources of funds for a nation, such as
exports or the receipts ofloansandinvestments, are recorded as
positive or surplus items. Uses of funds, such as for imports or to
invest in foreign countries, are recorded as negative or deficit
items.When all components of the BOP accounts are included they
must sum to zero with no overall surplus or deficit. For example,
if a country is importing more than it exports, its trade balance
will be in deficit, but the shortfall will have to be
counterbalanced in other ways such as by funds earned from its
foreign investments, by running down central bank reserves or by
receiving loans from other countries.While the overall BOP accounts
will always balance when all types of payments are included,
imbalances are possible on individual elements of the BOP, such as
thecurrent account, thecapital accountexcluding the central bank's
reserve account, or the sum of the two. Imbalances in the latter
sum can result in surplus countries accumulating wealth, while
deficit nations become increasingly indebted. The term "balance of
payments" often refers to this sum: a country's balance of payments
is said to be in surplus (equivalently, the balance of payments is
positive) by a specific amount if sources of funds (such as export
goods sold and bonds sold) exceed uses of funds (such as paying for
imported goods and paying for foreign bonds purchased) by that
amount. There is said to be a balance of payments deficit (the
balance of payments is said to be negative) if the former are less
than the latter.Under afixed exchange ratesystem, the central bank
accommodates those flows by buying up any net inflow of funds into
the country or by providing foreign currency funds to theforeign
exchange marketto match any international outflow of funds, thus
preventing the funds flows from affecting theexchange ratebetween
the country's currency and other currencies. Then the net change
per year in the central bank's foreign exchange reserves is
sometimes called the balance of payments surplus or deficit.
Alternatives to a fixed exchange rate system include amanaged
floatwhere some changes of exchange rates are allowed, or at the
other extreme a purelyfloating exchange rate(also known as a
purelyflexibleexchange rate). With a pure float the central bank
does not intervene at all to protect or devalue itscurrency,
allowing the rate to be set by themarket, and thecentral bank's
foreign exchange reservesdo not change.Historically there have been
different approaches to the question of how or even whether to
eliminate current account or trade imbalances. With record trade
imbalances held up as one of the contributing factors to
thefinancial crisis of 20072010, plans to address global imbalances
have been high on the agenda of policy makers since 2009.Theeconomy
of Switzerlandis one of the world's most stable economies. Its
policy of long-term monetary security and political stability has
madeSwitzerlanda safe haven for investors, creating an economy that
is increasingly dependent on a steady tide offoreign
investment.Because of the country's small size and high labour
specialization, industry and trade are the keys to Switzerland's
economic livelihood. Switzerland has achieved one of the highest
per capita incomes in the world with low unemployment rates and a
balanced budget. The service sector has also come to play a
significant economic role.
Population: 8.0 millionGDP (PPP): $363.4 billion , 1.0% growth ,
1.2% 5-year compound annual growth , $45,418 per
capitaUnemployment: 2.9%Inflation (CPI): -0.7%FDI Inflow: $3.6
billion
Switzerlands economic freedom score is 81.6, making its economy
the 4th freest for the first time ever in the 2014 Index. Its score
is 0.6 point higher than last year, with improvements in trade
freedom and the management of public spending partially offset by
declines in monetary freedom and labour freedom. Switzerland is
ranked 1st out of 43 countries in the Europe region.Switzerland was
first graded in the 1996 Index and its economic freedom score has
advanced since then by 4.8 points. Improved ratings for six of the
10 economic freedoms, led by the sound management of public
spending and notable enhancements in the area of market openness as
measured through trade freedom and financial freedom, have enabled
Switzerland to advance to economically free since 2010.As reflected
in the steady rise of its economic freedom over the 19 years it has
been graded, Switzerlands strong competitiveness is built on
flexibility and openness. The sound regulatory environment
encourages entrepreneurial activity and innovation. Banking
regulations and lending practices are prudent and sensible. The
judicial system, independent and free of corruption, provides
strong protection of property rights.
In the 1940s, particularly during World War II the economy
profited from the increased export and delivery of weapons to the
German Reich, France, Great Britain, and other neighbouring and
close countries. However, Switzerland's energy consumption
decreased rapidly.This is a chart of trend of gross domestic
product of Switzerland at market prices estimateby the Swiss
Government with figures in millions of Swiss Francs.YearGross
Domestic ProductUS Dollar Exchange
1980184,0801.67 Francs
1985244,4212.43 Francs
1990330,9251.38 Francs
1995373,5991.18 Francs
2000422,0631.68 Francs
2005463,7991.24 Francs
2006490,5451.25 Francs
2007521,0681.20 Francs
2008547,1961.08 Francs
2009535,2821.09 Francs
2010546,2451.04 Francs
2011in progress0.75 Francs
TheCIA World Fact bookestimates Switzerland's 2011 exports at
$308.3 billion and the 2010 exports at $258.5 billion.
CHAPTER 2 ECONOMY OF SWITZERLAND
Switzerland's largest trading partner is Germany. In 2009, 21%
of Switzerland's exports and 29% of its imports came from Germany.
The United States was the second largest destination of exports
(9.1% of total exports) and the fourth largest source of imports
(6.7%).Switzerland's neighbours made up next largest group; Italy
was third for exports (8.6%) and second for imports (10%), France
was fourth for exports (8%) and third for imports (8.1%) and
Austria was fifth for exports (4.6%) and sixth for imports (3.7%).
Major non-European trading partners included; Japan (seventh for
exports with 3.6% and twelfth for imports with 2%), China (eighth
for exports and imports with 3.1% and 2.5% respectively) and Turkey
(sixteenth for exports with 1.2% and ninth for imports with
2.3%).As a first world country with a skilled labour force, the
majority of Swiss exports are precision or 'high tech' finished
products. Switzerland's largest specificSITCcategories of exports
include;medicaments,glycosidesand vaccines, watches, orthopaedic
appliances and precious jewellery. Some raw ores or metals are
exported, but the majority of the exports in this category are
finished jewellery or other finished products. Agricultural
products that Switzerland is famous for, such as cheese (0.29%),
wine (0.05%) and chocolate (0.39%) all make up only a small portion
of Swiss exports and agricultural products make up only a small
portion of all exports.[20]Switzerland's main imports
include;medicaments, cars, precious jewellery and other
unclassified transactions. While Switzerland has a long tradition
of manufacturing cars,[21]there are currently no large-scale
assembly line automobile manufacturers in the country.
European UnionApart from agriculture, there are minimal economic
and trade barriers between the European Union and Switzerland. In
the wake of the Swiss voters' rejection of theArea Agreement in
1992, the Swiss Government set its sights on negotiating bilateral
economic agreements with the EU. Four years of negotiations
culminated inBilateral, a cross-platform agreement covering seven
sectors: research, public procurement, technical barriers to trade,
agriculture, civil aviation, land transport, and the free movement
of persons. Parliament officially endorsed the Bilateral in 1999
and it was approved by general referendum in May 2000. The
agreements, which were then ratified by the European Parliament and
the legislatures of its member states, entered into force on June
1, 2002.
International
comparisonCountriesAgriculturalsector%Manufacturingsector%Servicessector%Unemploymentrate%Unemploymentrate
(females)%Unemploymentrate (males)%Average hoursworked perweek
Switzerland3.82373.24.04.73.441.6
EU4.727.467.98.297.640.5
Germany2.229.86810.310.110.440.3
France3.924.371.88.89.58.139.1
Italy 4.229.8666.68.55.239.3
UK1.32276.75.34.85.742.4
US1.620.677.85.1[42]5.6[43]5.9[43]41[44]
SWITZERLANDS PROGRESS OVER TIME
Switzerland has kept its title as the world's most
competitiveeconomyfor the fifth year running, though it needs to
resist any temptation to protect its core banking sector if it
wants to stay top, the World Economic Forum said on Wednesday.The
Geneva-based body, most famous for gathering politicians and
billionaires at an annual shindig in the Alpine resort ofDavos,
said the same economies made the top 10 as last year, but in a
different order.Singapore and Finland remained in second and third
place respectively in the Forum's annual Global Competitiveness
Report.Germany, the United States, Hong Kong andJapanall edged up
while Sweden, the Netherlands and the United Kingdom all slipped by
two or three notches.The United States' flair forinnovationhelped
it reverse a four-year downward trend, although serious concerns
remained over its macroeconomic stability, the Forum said, ranking
it 117 out of 148 countries in that category.Switzerland has been
hit hard by a global crackdown on tax havens, succumbing to
pressure from the EU and the United States to give up a
centuries-old tradition of banking secrecy.While most of the top 40
remained relatively static,South Koreaslid six places to 25th,
weakened by its poorly functioning financial market, quality of its
institutions and extremely rigid labor market, said the
report.Chinaremained in 29th place and again led the BRICS pack,
whileIndonesiaclimbed 12 places to 38th, helped by a 17-place jump
in infrastructure and other advances.The report defines
competitiveness as "the set of institutions, policies, and factors
that determine the level of productivity of a country".Despite
continued economic woes, European economies are still the most
dominant in the world, according to the Global Competitiveness
Index 2012-2013 produced by the World Economic Forum.
CHAPTER 3 BOP DATA OF SWITZERLANDCompared to the same quarter
one year earlier, Switzerlands current account surplus advanced by
CHF 6 billion to CHF 20 billion. The financial account posted net
capital outflows of CHF 39 billion, compared with CHF 30 billion in
the same quarter one year earlier, and the composition of the net
outflows changed considerably. The outflows in Net Bank Lending
continued, while as for portfolio investment slight outflows were
visible.
Update Q2/2013 The second quarter showed one movement: Investors
were piling more into Swiss equities than Swiss into foreign stocks
again. The red line below crossed the blue again (see above). The
SNB losses in Q2/2013 represent an additional outflow; this time in
reserve assets. The losses, however, are only a valuation effect
and do not weaken the currency. The main important development,
however was that Net Bank Lending has inverted path, strong net
outflows of 28 bln. CHF.
The Balance of Payments for Q1/2013 In the first quarter of
2013, the Swiss franc weakened: one major reason behind this was
that outflows in the financial account, excluding reserve assets,
were able to counter the strong current account surplus. Direct
investment outflows intensified, net portfolio investments were
slightly negative. Most importantly net lending was slightly
negative for the first time since 2003, the Swiss were lending more
to foreigners than the opposite. The quickly available proxy for
the balance of payments are SNB sight deposits. They are not rising
any more; this implies that the SNB is not intervening, and
implicitly that the Financial Account (excl. SNB reserves) is able
to neutralize the continuously positive current account
surplus.
It becomes obvious that the two major enemies of the SNB are the
inflows via persisting current account surpluses and positive net
bank lending to Switzerland. The latter means that more foreigners
(e.g. rich foreign clients of Swiss banks) lend to the Swiss than
the Swiss to foreigners. It may also be a means of financing of
direct investments of Swiss multi-nationals. Since 2004 this net
lending component has been positive, most interestingly even during
the period of the weak franc. Portfolio Investments: In 2010 and
2012 more foreigners bought Swiss stocks than Swiss foreign
equities bonds play a minor role1. The carry trade, short-term
funds in euro or other foreign currencies financed with Swiss
francs, do not play a role any more. Direct Investments: Continuing
direct investments of Swiss multi-nationals represent outflows.
These outflows were helpful for the central bank, but they were far
smaller than in 2005 or 2006.The Swiss International Investment
Position shows that net lending by foreign clients has increased
despite some outflows due to regulation issues (see picture). Net
lending to Switzerland is increasing, currently 262 bln. CHF
(difference between column 2 and 3). We judge that the net positive
lending to Switzerland could remain a major danger for the central
bank because it sustains the Swiss real estate boom, implies rising
money supply and in the longer term inflation. Between 1999 and
2007, however, the Swiss saw more outflows in the financial
account, in both portfolio and direct investments. This helped to
offset the strong current account surplus. The high inflows of
around 400 billion francs between 2009 and 2012 could be countered
only with an increase of reserve assets. This number seems to be
far worse than during the collapse of the Bretton Woods system,
when the ten times bigger Germany had to buy reserves for 71
billion German Marks (at the time around 56 billion CHF).
As for the behavior of the Swiss franc, we suggest the following
insights: As opposed to Japan, Switzerland has a trade surplus in
goods and services. Together with migration to Switzerland, this
constitutes a strong argument for an appreciating franc, while the
yen should rather depreciate (what has effectively happened since
October 2012). Labor income (only 25% of total current account
surplus) represent an outflow and weakens the currency. The
investment income surplus may remain in foreign currency. This is
valid especially for direct investments of Swiss multi-nationals.
Whether income from portfolio investments is changed into francs
and CHF investments depends on short-term rate differentials and on
the relative attractiveness of Swiss stocks, i.e. on the net
portfolio investments. Net portfolio investments: Attractiveness of
Swiss stocks compared to European stocks We have seen above that in
2010 and 2012 foreigners bought far more Swiss equities than Swiss
foreign stocks. The Asset Market Model stipulates that the Swiss
franc can only weaken if euro zone stocks and peripheral bonds
obtain a rising attractiveness among Swiss investors. Those are the
ones that finally decide about the allocation of the Swiss current
account surplus. Especially Spanish, French and Italian stocks seem
to be at cheap valuations. The question, however, is if the
currently very weak consumer spending in these countries will
continue to harm company profits or not. For many Swiss investors,
Swiss real estate and stocks offers lower risk and higher
return.
A trade surplus can be seen as a proxy for the combination of
company profits in international trade and/or a public sector
surplus (see more). The Spanish trade deficit was particularly high
in 2007 with a spending rush based on the real-estate bubble, but
interest rate differentials (the so-called carry trade) between the
euro zone and Switzerland kept the franc weak.
CHAPTER 4 COMPARISON OF LAST FIVE YEARS BOP STATUS OF
SWITZERLANDIn 2009,Switzerland's economy benefits from a highly
developed service sector, led by financial services, and a
manufacturing industry that specializes in high-technology,
knowledge-based production. In recent years the Swiss have brought
their economic practices largely into conformity with the EU's, in
order to enhance their international competitiveness, but some
trade protectionism remains, particularly for its small
agricultural sector. The global financial crisis and resulting
economic downturn put Switzerland in a recession in 2009 as global
export demand stalled. The Swiss National Bank during this period
effectively implemented a zero-interest rate policy in a bid to
boost the economy and prevent appreciation of the franc.
Switzerland's economy will probably experience modest GDP growth in
2010, when Bern is scheduled to implement a third fiscal stimulus
program, but its prized banking sector has recently faced
significant challenges. The country's largest banks suffered
sizable losses in 2008-09, leading its largest bank to accept a
government rescue deal in late 2008. In 2009 Swiss financial
regulators ordered the country's largest bank to reveal at
Washington's behest the names of US accountholders suspected of
using the bank to commit tax fraud. Bern also has recently signed
dual taxation agreements with more than ten countries to improve
information exchange. These steps will have a lasting impact on
Switzerland's long history of bank secrecy.In the last 3 months of
2009 the GDP grew by 0.6% which showed the first increase of the
year. As there was a growth rate of 0.7% and 0.5% from the last 2
quarters of 2009 there was a solid increase in house hold spending,
there was better support from the government regarding the economy
and there was a higher demand for Swiss goods. Fiscal stimulus is
the main contributor to rise in Switzerlands GDP. A cut back on
monetary stimulus and focus on fiscal policies to improve
conditions in intended in future.
In 2010,Swiss Economy Stabilizing But Recovery in 2010 Remains
Sluggish And Unemployment High.Tourism, banking, engineering, and
insurance are significant sectors of the economy and heavily
influence the country's economic policies. Swiss trading companies
have unique marketing expertise in many parts of the world,
including Eastern Europe, the Far East, Africa, and the Middle
East. Not only does Switzerland have a highly developed tourism
infrastructure (making it a good market for tourism-related
equipment and services), the Swiss also are intrepid travellers.
Per capita, Switzerland is among the countries with the most
visitors to the United States every year. In 2010, about 391,000
Swiss citizens came to the United States as tourists. Tourism is
the most important U.S. export to Switzerland.Economic Tendencies
and Forecasts by Expert Group on Economic Forecasts of the Federal
Government. The global economy is currently recovering faster than
anticipated from the previous strong economic slump. In
Switzerland, too, the recession has slowed down in the second
quarter, and for the second half of the year, a positive change is
underway. For this reason, the expert group of the Federal
Government is expecting a weaker decline of the Swiss gross
domestic product (GDP) than in June (-1.7% instead of -2.7%).
However, it is assumed that the international economy, after its
first strong recovery, will run out of steam again in the course of
2010 which will also limit further economic recovery in
Switzerland. For 2010, the expert group expects a weak GDP growth
(+0.4% instead of -0.4%) and rising unemployment.
In 2011,The Swiss economy increased by 2.7% in 2010; its growth
was expected to slow to 1.7% for 2011 as a result of various
factors such as an appreciating Swiss franc. However, due to
successful government debt reduction (imposed by the so-called debt
brake), Switzerland is not expected to be impacted by strict
austerity measures imposed in other areas of Europe. Switzerland
led the rankings of the World Economic Forums Global
Competitiveness Report 2011-2012, reflecting the country's sound
institutional environment, excellent infrastructure, efficient
markets, competent macroeconomic management, world-class
educational attainment, and high levels of technological
innovation, which boost Switzerland's competitiveness in the global
economy. The country has a well-developed infrastructure for
scientific research. Companies spend generously on research and
development (R&D), and intellectual property protection is
strong. Business activity benefits from a well-developed
institutional framework, characterized by the rule of law, an
efficient judicial system, and high levels of transparency and
accountability within public institutions. Higher education and
training are rapidly growing in importance as engines of
productivity growth.The Swiss economy earns roughly half of its
corporate earnings from the export industry. The EU is
Switzerland's largest trading partner (59% of exports and 75% of
imports in 2010), and economic and trade barriers between them are
minimal. After more than 4 years of negotiations, an agreement
known as the "Bilaterals I" covering seven sectors (research,
public procurement, technical barriers to trade, agriculture, civil
aviation, land transport, and the free movement of persons) entered
into force on June 1, 2002. Switzerland has so far attempted to
mitigate possible adverse effects of non-membership by conforming
many of its regulations, standards, and practices to EU directives
and norms. Full access to the Swiss market for the original 15 EU
member states entered into force in June 2004, ending as a result
the "national preference." The Swiss agreed to extend these
preferences to the 10 new EU members on September 25, 2005, with
restrictions remaining until 2011.
In 2012,Swiss GDP grew by 0.2% q-o-q in Q4 2012 (+1.0%
annualised), above consensus expectations (+0.0%), but
significantly below the growth rate recorded in Q3 (+0.6%).
Actually, quarterly growth was quite volatile last year, with
strong numbers in Q1 and Q3, and weaker figures in Q2 and Q4.
Nevertheless, looking beyond short-term volatility, the overall
picture is that Swiss GDP growth remained surprisingly resilient
last year: +1.4% y-o-y in Q4 2012. In the context of a recession in
the euro area, this performance can be considered as quite healthy.
The Swiss economy is clearly keeping the lead compared to most
other European countries. Euro-area real GDP was down -0.9% y-o-y
in Q4 2012.Switzerland is an OECD country, a wealthy, medium-sized
economy located in Western Europe. Switzerland has a population
of8.29million people.In2012Switzerland's GDP was USD631billion.
Switzerland's GDP grew at1.00%in2012. GDP per capita, in purchasing
power-adjusted dollar terms, is USD44,864.Inflation in Switzerland,
as measured by the change in consumer price index, was-0.67%in2012,
versus0.23%in2011. Unemployment in Switzerland in2012was2.90%,
versus2.80%in2011.Switzerland's economy is predominantly
services-based. Agriculture accounts for1.12%of GDP and
employs3.40%of the population. Manufacturing and industry accounts
for26.03%of GDP and employs20.30%of the population. Services
accounts for44.60%of the GDP and employs35.70%of the
population.Switzerland's total exports inn.a.were USDn.a.billion
while its total imports were USDn.a.billion.Switzerland's
government revenues are33.85%of GDP while its government spending
is33.44%of GDP. Thus Switzerland's government runs a surplus
of0.85%of GDP. Net government debt is25.91%of GDP.Switzerland's
currency is the Swiss Franc (CHF). The latest exchange rate, as
of20-Jan-2014, is0.91CHF per 1 USD.
In 2013,Switzerland recorded a current account surplus of Sfr66
billion ($70 billion) in 2013, a Sfr14 billion increase on the year
before, driven chiefly by overseas investment income, which nearly
doubled to Sfr40 billion, according to the country's balance of
payment figures released by the Swiss National Bank (SNB) today.The
Swiss financial account, meanwhile, saw a net capital outflow of
Sfr97 billion nearly a tripling of the previous year's figure
following the SNB's large purchases of foreign assets in an attempt
to keep the Swiss franc from appreciating to unsustainable levels
as investors sought a 'safe haven' from the turmoil in the eurozone
last year.Reserve assets at the SNB, mainly consisting of gold and
foreign currency investments, increased by Sfr175 billion on a
transaction basis nearly a fourfold increase from 2011 reflecting
the central bank's commitment to keeping the franc from
appreciating to levels that would threaten the livelihood of Swiss
exporters. By contrast, net capital inflows of Sfr94 billion were
registered in banks' lending and deposit business (Sfr58 billion),
Swiss National Bank lending (Sfr23 billion) and portfolio
investment (Sfr13 billion).The higher receipts from Swiss direct
investment abroad are largely made up of returns on holdings that
the SNB accumulated when intervening in the open market in an
effort to put downward pressure on the exchange rate during the
past few years.In foreign trade of goods and services, a receipts
surplus of Sfr57 billion was recorded, compared with Sfr59 billion
one year earlier. The decline was due to the fact that the 2%
growth in receipts from exports of goods and services was lower
than the increase in the cost of imports, the SNB said.Direct
investment by the services sector declined, while manufacturing
investment increased slightly. The European Union, Asia and central
and south America each received one-third of direct investment,
according to the central bank.Foreign direct investment in
Switzerland fell dramatically from Sfr21 billion to just Sfr1
billion due to "disinvestment in finance and holding companies",
despite the manufacturing industry "becoming a recipient of direct
investment again", following disinvestment in 2013The annual
balance of payments report will not be published next year due to
the introduction of new statistical standards, the SNB said.Despite
continued economic woes, European economies are still the most
dominant in the world, according to the Global Competitiveness
Index 2012-2013 produced by the World Economic Forum.The list is
based upon 12 pillars, including institutions, infrastructure,
microeconomic environment, health and primary education, higher
education and training, goods market efficiency, labor market
efficiency, financial market development, technological readiness,
market size, business sophistication and innovation, which all help
to weight a score out of seven.While we report the results of the
12 pillars of competitiveness separately, it is important to keep
in mind that they are not independent," explained the report. They
tend to reinforce each other, and a weakness in one area often has
a negative impact in others. For example, a strong innovation
capacity (pillar12) will be very difficult to achieve without a
healthy, well-educated and trained workforce (pillars4 and 5) that
is adept at absorbing new technologies (pillar9), and without
sufficient financing (pillar8) for R&D or an efficient goods
market that makes it possible to take new innovations to market
(pillar6). Although the pillars are aggregated into a single index,
measures are reported for the 12 pillars separately because such
details provide a sense of the specific areas in which a particular
country needs to improve.
CHAPTER 5 - CONCLUSIONIn the past Switzerland typically had a
foreign trade deficit. More recently, however, this imbalance was
more than compensated for by income from services, investments,
insurance, and tourism. Restructuring of enterprises in the 1990s,
due to the strength of the Swiss franc, caused the export-oriented
manufacturing sector to become highly successful. Exports of goods
and services amounted to some 46% of GDP in 2000.The US Central
Intelligence Agency (CIA) reports that in 2002 the purchasing power
parity of Switzerland's exports was $100.3 billion while imports
totalled $94.4 billion resulting in a trade surplus of $5.9
billion.The International Monetary Fund (IMF) reports that in 2001
Switzerland had exports of goods totalling $95.8 billion and
imports totalling $94.3 billion. The services credit totalled $27.7
billion and debit $15.3 billion. The following table summarizes
Switzerland's balance of payments as reported by the IMF for 2001
in millions of US dollars.Switzerland has kept its title as the
world's most competitive economy for the fifth year running, though
it needs to resist any temptation to protect its core banking
sector if it wants to stay top, the World Economic Forum said on
Wednesday.Switzerland has been hit hard by a global crackdown on
tax havens, succumbing to pressure from the EU and the United
States to give up a centuries-old tradition of banking secrecy. It
also made a big improvement in labour market efficiency, but was
let down by bribery, security and a worsening health picture. There
was also little change at the bottom of the list. The overall
wooden spoon went to Chad, just behind Guinea and last year's loser
Burundi. The report defines competitiveness as "the set of
institutions, policies, and factors that determine the level of
productivity of a country".
GrowthIndicatorLevelUnitAs Of1Y Chg~5Y Ago~10Y Ago~25Y Ago
GDP631Billion USD2012n.a.524335198
Real GDP Growth1.00%% Chg YOY2012-0.80%2.20%0.00%3.30%
GDP Per Capita78,881USD2012-4.77%69,04945,74630,137
GDP Per Capita at PPP44,864USD at
PPP20122.20%43,02833,84122,040
GDP as Share of World GDP at PPP0.43%% of
World2012-0.01%0.46%0.50%0.70%
Real GDP543Billion USD20111.93%516455361
Balance of PaymentsIndicatorLevelUnitsAs Of1Y Chg~5Y Ago~10Y
Ago~25Y Ago
Trade Balance65.86Billion USD2012-3.49%58.1721.562.12
Current Account Balance69.54Billion
USD2011-11.49%38.8424.557.29
External Debtn.a.Billion USDn.a.n.a.n.a.n.a.n.a.
Trade Balance as Share of GDP10.43%% of
GDP20120.05%11.09%6.44%1.07%
Current Account Balance as Share of GDP10.52%% of
GDP2011-3.74%8.62%8.56%3.99%
External Debt as Share of GDPn.a.% of
GDPn.a.n.a.n.a.n.a.n.a.
In the 1950s, annual GDP growth averaged 5% and Switzerland's
energy consumption doubled. Coal lost its rank as Switzerland's
primary energy source, as other fossil fuels such as crude and
refined oil and natural and refined gas imports increased. This
decade also marked the transition from an industrial economy to a
service economy. Since then the service sector has been growing
faster than the agrarian and industrial sectors.In the 1970s GDP
growth rates gradually declined from a peak of 6.5% in 1970 until
contracting 7.5% in 1975 and 1976. Switzerland became increasingly
dependent on oil imported from its main supplier, the OPEC cartel.
The 1973 international oil crisis caused Switzerland's energy
consumption to decrease from 1973 to 1977. In 1974 there were three
nationwide car-free Sundays when private transport was prohibited
as a result of the oil supply shock. From 1977 onwards GDP grew,
however Switzerland was also affected by the1979 energy crisiswhich
resulted in a short term decrease of Switzerland's energy
consumptionIn the 1990s, Switzerland's economy was marred by slow
growth, having the weakest economic growth inWestern Europe. The
economy was affected by a 3-year-recession from 1991 to 1993 when
the economy contracted by 2%, which also became apparent in
Switzerland's energy consumption and export growth rates.
Switzerland's economy averaged no appreciable increase (only 0.6%
annually) ingross domestic product(GDP).The stock market collapse
has deeply affected investment income earned abroad. This has
translated to a substantial fall in the surplus of thecurrent
account balance. In 2006, Switzerland recorded a 15.1% per GDP
surplus.