Economy under pressure, how crisis-proof is Switzerland?
A new KOF study analyzes the resilience of the Swiss economy to geopolitical risks and trade conflicts. Switzerland shows resilience, but is particularly vulnerable to global tensions, with potential consequences including recession.
Since the intensification of global trade conflicts under the current US administration, questions about economic resilience have once again come to the fore. A new study by the KOF Swiss Economic Institute at ETH Zurich sheds light on how vulnerable the Swiss economy actually is to international upheavals.
KOF Co-Director Hans Gersbach puts it in a nutshell and says that Switzerland is both robust and vulnerable at the same time. While short-term shocks can usually be cushioned well, prolonged trade conflicts threaten permanent GDP losses of over one percent per year. Key sectors such as mechanical engineering, pharmaceuticals and the precision industry, which also play a central role for Switzerland as a business location and the real estate markets, would be hit particularly hard.
Scenarios show risks for location and stability
The analysis is based on the new “KOF Trade Model”. An innovative equilibrium model that maps global supply chains, price changes and demand effects in detail. The simulations show that almost all of the scenarios examined are negative for Switzerland, especially if protectionist measures affect entire trading blocs.
An escalation between the USA and Europe would be particularly critical, as a result of which Switzerland would also be affected by counter-tariffs. In this case, growth could fall by more than one percent of GDP per year. A serious blow, especially for export-oriented industries and their business environment.
Recognize risks early and strengthen resilience in a targeted manner
The study also names specific areas of action. Free trade agreements and strategic diversification of import and export markets are among the most important levers for strengthening the resilience of the Swiss economy. Stable framework conditions for investments in key technologies and an innovation-friendly environment are equally crucial.
Foresight instead of alarmism
The KOF study shows that Switzerland is vulnerable at a global level, but has instruments at its disposal to minimize risks. A smart trade policy, strategic promotion of innovation and stable institutional framework conditions not only strengthen the economy, they also make the business location more crisis-proof and attractive for long-term investments.