Coface assesses Swiss risks in a global context
The Swiss economy is proving resilient to the current crises, but it is not an island. At our Country Risk Conference, we explored the background to the downgrading of Switzerland and informed on global risk scenarios.
In Coface Q3 risk Barometer, Switzerland has been downgraded in the current risk assessment. Like Luxembourg and Denmark, coming from the lowest risk of A1, Switzerland is now classed as A2. At the Coface Country Risk Conference in Zurich, expert Christiane von Berg put the reasons behind this assessment in a global context. As Head of Economic Research for Coface Northern Europe and Belgium, she explained the results of the risk Barometer for the third quarter of 2022, in which the global growth forecast for 2023 was revised downward to below 2 per cent. Overall, the barometer depicts the risk development of 162 countries and the 13 most important economic sectors in 28 main economies.
Switzerland lost the top spot once in the first year of the pandemic, but it then reclaimed its A1 assessment. Now, Coface has given the lowest risk rating only to gas producer Norway, which is faring best in the current crises. However, von Berg emphasized that Switzerland is navigating well. For example, with regard to risks in the economic sectors, it is one of the best-rated countries alongside the Netherlands in Western Europe. If Switzerland stays on course now, she said, it could be quickly upgraded again with Luxembourg. Nevertheless, Coface’s downgrade was intended to send a signal: "Switzerland is not an island," she said.
The credit risk expert explored trends such as the development of Switzerland's neighboring country, Italy: it has been downgraded to B, an assessment that is not normally applied to Western European countries. Here, the high level of debt had coincided with the rising interest rate level, the effects of the Ukraine war and the outcome of the last elections.
In 2023, Coface expects gross domestic product to grow by 0.8 per cent in Switzerland compared to 2022 and by 1.1 per cent in Austria. The prospects for trading partners such as Germany (-0.5 per cent), Italy (-0.4 per cent) and France (0.1 per cent) are less optimistic. With the latest figures on inflation, Switzerland stands out with 3.0 per cent in October, while the eurozone is struggling with 10.6 per cent this autumn.
In the European environment, Christiane von Berg expressed the hope that, among other things, state support measures for the economy would have a stabilising effect, as in the case of Germany. In addition to the actual fiscal aid, the psychological effect also plays an important role. However, this will not be the last winter in which high energy prices have to be faced.
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