Economic outlook for Switzerland in 2021

Relocation of the global village
Traditionally, the Swiss economic year would start with a bang in January, with the World Economic Forum (WEF) annual meeting in Davos. Last year, the WEF was still in the global spotlight with, among other things, the visit of US President Donald Trump. Not so in 2021: the WEF has decided to hold its annual congress – on its 50th anniversary, no less – in Singapore this year.

This means that the Swiss economy will lose millions of francs, but not only that. The symbolic effect of this world event being relocated to Singapore reflects the increasing competition from Asia as a business location. Singapore has become a serious rival, especially for Swiss banks. Since the fall of Swiss banking secrecy, the flow of money from Switzerland to Singapore has increased significantly.

Asia in general is in a stronger position thanks to the world’s largest trade agreement in history: the new Asian free trade zone RCEP (Regional Comprehensive Economic Partnership), which includes economic heavyweights China, Japan, South Korea, Australia and Indonesia. It will be interesting to see how agreements like this will affect the commodities sector, which is strongly anchored in Switzerland.

Hoping for vaccination
The outlook for the Swiss economy over the next year is mixed, with forecasters predicting an upturn only in the second half of the year. Switzerland will be more dependent than ever on its multinational pharmaceutical companies. This fast-growing sector, which now accounts for almost half of Swiss exports in terms of value, has not only passed the coronavirus test without any problems, but has emerged even stronger.It is expected to keep growing in importance and soon exceed a 10% share of Switzerland’s gross domestic product (GDP).

Other Swiss export sectors also depend on the pharmaceutical industry to revive their businesses and keep jobs in Switzerland. All are impatiently awaiting the Swiss vaccination campaign that is starting in late December.

This is particularly true of the watchmaking industry, one of the sectors most affected by the pandemic. Exports of Swiss watches plunged by almost a quarter in 2020, the biggest drop in a year since the Second World War. Although watchmakers are pleased with the upturn observed in China in recent months, they are hoping for a quick return of tourists and the reopening of boutiques in Europe and North America.

Less well-known and visible than the watch industry – but much more important in terms of exports and Swiss jobs (320,000) – the machinery, equipment and metals (MEM) industry faces a very uncertain future. Ultimately, manufacturers of machine tools for the watchmaking, aerospace and automotive industries are particularly affected by the pandemic. They will probably be the last to see signs of a sustained recovery.

Science in 2021: beyond the pandemic
The coronavirus pandemic has upended almost every aspect of life, including the way we buy, prepare and eat food. Swiss-based food manufacturer Nestlé reports that demand for plant-based foods – such as meat and dairy alternatives – shot up as people tried to eat healthier at home and Covid-19 outbreaks hit meat production facilities.

Switzerland is home to numerous companies and start-ups that are creating plant-based foods and changing the calculus for the future of agriculture. In 2021, we’ll continue to follow these trends and what they mean for our diets and the climate.

Swiss start-ups – as well as food giants like Nestlé – are also trying to find alternatives to plastic packaging, which has been shown to end up in our bodies and in the environment at alarming levels. Next year, we’ll also be keeping tabs on the latest in materials science, and how so-called “bio-inspired materials” – or materials found in nature – could offer alternatives in packaging, pesticides and other areas.