The war hit the Swiss economy hard

Russia’s invasion of Ukraine hit Europe hard economically. Since then, there has been an important constant for the economy and population: uncertainty. How are energy prices doing? Is there still a risk of running out of gas or electricity in Europe next winter? Is the world economy going into recession?

The strong Swiss economy should ask itself these questions. Blick summarizes the most important points.

Deep cut for the export economy

The Ukrainian war led to enormous production losses. As a result, according to a study by the German Economic Institute in Cologne, the performance of the global economy declined by 1.6 trillion dollars. The weakening world economy also affects Switzerland, the country of export. And in line with the world stock markets, the leading Swiss index SMI dropped significantly.

Companies suffer from supply bottlenecks

The availability of raw materials, supplies and preliminary products for companies has deteriorated. A problem that has been affecting the economy since the second half of the corona pandemic. “But the war has worsened the situation again,” says Rudolf Minsch, 56, chief economist at the economic umbrella organization Economiesuisse. Despite China removing its zero Covid strategy, its supply chains are still not running smoothly.

High energy prices burden companies

The explosion in electricity and gas prices shook energy-intensive companies. Industrial companies in Switzerland were particularly affected. Electricity prices hit sawmills, but bakeries, hotels and mountain railroads also suffered. Some mountain railways had to sign new high-priced electricity contracts and therefore increase their prices. These have since calmed down again, but are still higher in Europe than in the US or China. Europe is becoming less attractive as a workplace for companies. Prices could rise sharply again next winter. Europe is facing electricity and gas shortages as countries now have to make a living with almost no Russian energy.

An industry is making record profits

Switzerland is the center of international commodity trade. A strong wind has been blowing against the secret sector for months. At the outbreak of war, Swiss companies were trading 80 percent of Russia’s raw material exports. Left-wing politicians wanted to put an end to it. As a result, despite the rising prices, the trading volume actually fell for a short time. In the worst-case scenario, the Center for Economic Research at ETH Zurich even expected Swiss gross domestic product (GDP) to shrink if large trade volumes were moved abroad. But by the end of 2022, Swiss commodity groups like Vitol or Trafigura reported record profits. Zug-based Glencore alone earned $17 billion. Industry accounted for 8.5 percent of GDP.

The hole in people’s wallets

The war initially made itself felt especially among the people at the gas station: Unleaded gasoline was 1.76 francs a liter in January 2022 and 50 centimeters more in June. The price is now back to 1.77 francs. Inflation has also had a noticeable effect on food prices in recent months. They cost an average of 5.6 percent more than they did twelve months ago. This year, energy prices hit side costs. For a 4.5-room apartment these are on average 100 francs more per month.

Source :Blick