Impact of Slowdown of Developing Asisa on Swiss Economy

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The Warwick MBA
Assignment Cover Sheet
Submitted by: 0966379
Date Sent: 16.10.2012
Module Title: Economics of the Business Environment
Module Code: IB8270
Date/Year of Module: 2012-2013
Submission Deadline: not available
Word Count:1742
Number of Pages:11
Question: Assignment Lesson 4
Select a national economy and using the AS/AD model carry out: a. an analysis of its performance over the last five years b. an analysis of its prospects for the next year.
Identify main strengths and weaknesses.
“This is to certify that the work I am submitting is my own. All external references and sources are clearly acknowledged and identified within the contents. I am aware of the University of Warwick regulation concerning plagiarism and collusion. No substantial part(s) of the work submitted here has also been submitted by me in other assessments for accredited courses of study, and I acknowledge that if this has been done an appropriate reduction in the mark I might otherwise have received will be made.”

Swiss economy has escaped recent turbulence, forwarding into 2013 with careful optimism

As the below figure 1.1 illustrates that the Swiss economy has out-performed most major economies in the world since 2005 in terms of Real GDP growth rate. It has escaped the financial crisis relatively in good shape during 2008 to 2009, compare to most other advanced economies. It picked up a good recovery in 2010 but immediately slowed down in 2011 and 2012. From the Swiss economy forecast published by State Secretariat for Economic Affairs (Seco) dated 18th September 2012, it looks like a bumpy ride ahead, though with careful optimism.

Figure 1.1

The Swiss economy is based on a highly qualified labor force. The main areas include micro technology, hi-tech, biotechnology and pharmaceuticals, as well as banking, insurance and tourism. Having virtually no mineral resources and a limited surface area / domestic market, Swiss economy is highly foreign trade dependent. According to the data from the World Bank, the Swiss export revenue as percentage of the GDP was 56, 56, 52, 54 percent in year 2007 to 2010 (http://data.worldbank.org/indicator/NE.EXP.GNFS.ZS) . The numbers for import were 46, 45, 41, 42 percent for the same period (http://data.worldbank.org/indicator/NE.IMP.GNFS.ZS). With the importance of banking, insurance and tourism, service industry plays important role in the Swiss economy. According to the data from Global Finance, service industry contributes 71.3% to the GDP in 2011 (http://www.gfmag.com/gdp-data-country-reports/168-switzerland-gdp-country-report.html#axzz29IXZuGYo). The Swiss economy has enjoyed a continuous growth at a steady pace from 2004 to 2008. In 2009 the Real GDP growth showed a downslope (see figure 1.2).

Figure 1.2

As previously stated that Swiss economy is highly foreign trade dependent. Its main trading partners are European Union members. By far the biggest partner is Germany. In 2010 it was followed in descending order by Italy, France, the Netherlands, the US and the United Kingdom. In 2009, 59.7% of exports went to EU countries. The Euro Area was heavily hit by the Global Financial Crisis, reaching its record low of GDP growth rate of -2.5% in 2009. The Swiss export revenue with Germany alone went down 15.9 percent in 2009 and similar situation with other trade partners in the EU area. The decreased export demand was the main driving factor for the decreased aggregate demand of the Swiss Economy. Another factor that drove down the aggregate demand was the reduced capital spending, as shown in figure 1.3.

Figure 1.3

The global financial crisis that started in 2007 had serious impact on the market confidence. According to the statistic shown in figure 1.4 the business confidence has reached its record low in 2009.

Figure 1.4
Luckily the private consumption was without much fluctuation, I assume it is due to the fact that Switzerland is among those countries...
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