From here it appears that the country’s economy is in bad shape, also as an effect of the global economic recession that transpired since 2002. As indicated by the Swiss National Bank, there is a possibility that the economy could contract by up to 3% this year because of the steep decline in relation to the global GDP growth (shown on page 9). As indicated, there has been a renewed cyclical weakening in the Swiss economy since the end of 2004, and this weakening was expected to expand by 1. 25% in the following years ahead (Organization for Economic Cooperation and Development, 2006, p. 1). • Safe haven status.
The economy of Switzerland is in the process of dematerializing, and with negative direct material input and negative percentage of DMI, the stable GDP and material efficiency do not count much to conclude that the Swiss economy is indeed, a safe haven for investors. It is enough to say that the country is in vigorous economic expansion, out of weak economic growth in 2001 and 2002. It is therefore, undergoing a current upswing in terms of its economy; yet, there is currency depreciation and financial intermediation from the global and domestic capital market, signifying a demand in the aggregate supply in the economy.
Switzerland still is a prosperous country, facing an improvement in the unemployment rate, but stuck in low-growth trap while facing fiscal policy problems. Its stable GDP only resulted to a rising stock-market indices, as well as, strong increases in the market turnover. By dealing positively with the raising growth performance, and restoring better control over public spending, there is a possibility that the temporary upswing turns into a permanent one with the help of macroeconomic policy, despite plunging global economy.
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It is however, insufficient to state that the Swiss economy is currently a safe haven for investors, especially that inconsistencies are seen in the long-term interest rates and the past and current exchange rates. The situation has been worsening, as there has been steady rise in the numbers that have been projected currently. Global recession is not yet over, while recovery is expected to be sluggish. Because of a vigorous economic expansion, which allowed the country to rise from a weak economic growth, it is being stated that the global economy (and therefore the local ones) could improve the capital market activities.
There is large inflow of immigrants in the country, and this makes longer-lasting contribution in totality. Swiss banking industry and its relation to business Central banks and supervisory authorities, as reported, has been cutting sizes of biggest lenders, which carries a threat to the Swiss economy, imposing constraints to domestic businesses in the long run. With the soaring exchange rate in Switzerland this month, this could lead to obliteration, especially for small businesses that are on the verge of maintaining or even improving their revenues.
However, as reflected in the history of exchange rates in Switzerland, these ‘tides’ come and go, and after the soaring exchange rates come the plunging, which signifies the best time to open businesses or invest. The acceleration of consumption could worsen the cases for small businesses, so that the best time to open one should arrive at the market turnover, which indicates lower interest rates and exchange rates. Increased immigration however, signifies higher competition among businesses, which is another factor that should be considered vehemently.
It should all depend on the type of business that is to be invested in the country, as well as, the amount of starting revenue attached to the business. There are certain cases wherein the constraints of the country appear to be ineffective, which mean that Switzerland is a safe haven, especially for those involved in businesses that have high revenues. There is a possibility that there will be a downward trend in the exchange rate of the Swiss Franc, and this appears to be beneficial in the short and long run.
The banking industry is in the process of containing an upswing after the stock market plunged in 2001 and 2002, but the recovery appears to be slow and sluggish. The stress of the banks therefore, remains in the fluctuations in the condition of the sector. Being vulnerable and weak, it is apparent that the Swiss Franc is not yet a safe haven, especially for the smaller, more susceptible types of businesses. Conclusion Like its EU neighbours, Switzerland’s economy faces an uphill struggle (Outlook for Swiss economy worsens, 2009) Swiss politics is defined by neutralism, especially concerning joining the extremes.
They are hesitant and pragmatic that the action would be beneficial to them, although it is not to say that they have been exercising Euroscepticism, since the term relays too strong an opposition than what the Swiss politics exercises. Soft Euroscepticism is what can be used, and this carries the ability of blocking official policies that remain to be a significant force in the Swiss politics. It is not to say that they lack interest in politics as well, since they have been in debate as to whether or not joining the EU would appear to be plausible for the country.
The rise of extreme xenophobic right concludes a far, anti-foreigner right that remains to be a challenge to the existing political establishment seen on the land. As it uses direct democracy in its establishment of politics, it has the ability of affecting the continent’s wider evolution. As for the economy, it is indicated that Switzerland’s economy would shrink by some 2. 2% this year, a much deeper recession than what was forecasted earlier (Outlook for Swiss economy worsens, 2009).
Slight recovery is to come more abundantly in 2010, which then signifies a better time to invest or come in terms with the Swiss Franc. As of now, the global economy appears to be gloomy since the end of last year. SECO indicated that the downbeat economic environment of the globe appear to be the deciding factor in the end. Switzerland is a safe haven, but not when the global economy is sliding down.
Church, C. (2003, May). SEI Working Paper No. 64: The contexts of Swiss opposition to Europe. Retrieved July 22, 2009, from the Sussex European Institute database: http://en.wikipedia.org/wiki/Economy_of_Switzerland