Editions

Restrictive monetary policy, falling but still high inflation and multiple uncertainties will continue to slow the global economy this year. According to the KOF Economic Forecast, worldwide business activity will not pick up again until 2025.

Swiss foreign trade is holding up well despite global turbulence and the current weakness of major trading partners such as China and Germany.

The international economy has slowed. Above all, the effects of China’s weakness and of restrictive monetary policy are weighing on the global economy.  

KOF economists Vera Eichenauer and Heiner Mikosch talk in an interview about the Chinese economy’s weaknesses and their impact on the Swiss economy.

Although the much-feared energy crisis has failed to materialise, persistently high inflation, rising interest rates and geopolitical conflicts are weighing on the global economy.

One-fifth of Swiss industrial companies are moderately to heavily reliant on critical inputs from China. Their greatest dependence is in the electronics sector, followed by the pharmaceuticals and chemicals sectors. Just under one-fifth of firms are unable to assess their own reliance. The measures already taken or those that are planned reveal that production and procurement are being redirected towards Europe and Switzerland. These are among the findings of a KOF company survey.

In Europe, persistently high inflation and high energy costs are likely to continue to weigh on demand. In the United States, inflation is leading to a loss of purchasing power, while rising interest rates are dampening investment. The outlook for the Chinese economy has also darkened.

Almost all of Switzerland’s major trading partners are currently grappling with the economic consequences of the Russia-Ukraine war and with self-inflicted problems. In this interview, Heiner Mikosch and Philipp Kronenberg from KOF’s International Forecasts Section analyse the current situation of the global economy

KOF Director Jan-Egbert Sturm talks in an interview about the latest price increases in almost all currency areas, central banks’ potential counter-strategies and why inflation in Switzerland remains moderate.

Reality for much of the year so far during the coronavirus crisis has consisted of lockdowns, working from home and living a dreary everyday existence while stock markets have kept hitting new highs. However, there are academic explanations for this apparent contradiction.

Globalisation increased only slightly in 2018. Although economic globalisation has recently grown, the emerging international trade conflicts have revealed their first negative effects. The coronavirus crisis is likely to further slow economic and social globalisation as a result of the worldwide recession and restricted mobility. The most globalised countries are Switzerland, the Netherlands and Belgium.

Brexit has put the issue of independence back on the political agenda in Scotland. This publication examines what economic factors reinforce separatist tendencies. Regional resource wealth plays a central role in this context. In particular, the analysis shows that oil discoveries have a causal effect on the electoral success of Scottish separatists.

The clock is ticking. If the EU and the UK fail to sign an agreement by the end of December, a no-deal Brexit will become a reality – with drastic consequences for the British. It is estimated that, by 2030, UK GDP would be 2.5 per cent lower than if the withdrawal followed an orderly process and 5.3 per cent lower than without Brexit altogether. Long-term adjustments would not take place for 15 years.

More competition, better allocation of resources, higher productivity – that is what European integration should ensure. A recent study of the longer-term effects of integration shows that, while it has led to reforms in product markets, it has had little impact on financial and labour markets. If reforms are brought about nonetheless, this is due not only to the euro but also to the single market.

The fight against the COVID-19 pandemic is causing severe distortions in goods, labour and capital markets. However, it takes several weeks or even months for the reality to reach official statistics and econometric models. In the US, important basic statistics are published earlier and in more detail than in many other countries. The first available indicators for March confirm scenario calculations that predicted a sharp recession.

Global economic dynamism was relatively weak also last year. Economic policy uncertainties, dwindling world trade and weak demand for investment goods left a major mark in particular on Europe and East Asia. This article looks back over 2019 and examines Switzerland’s economic environment.

A new study shows that globalisation has diminished the income share of the middle class. Even the poorer parts of the population saw their income shares decline, while the shares of high incomes has risen. This effect is driven by developments in transition and developing countries.

Important decisions on Brexit are due in mid-March. It is still unclear whether the United Kingdom will withdraw from the European Union in a regulated or unregulated manner - or whether the Brexit vote will be taken again. In the present state of things, Switzerland and the United Kingdom signed a bilateral trade agreement on 11th February which would regulate post-Brexit relations. This article shows the importance of the countries for each other and how they are linked to the rest of the EU. 

The debt ratio in the non-financial private sector of the Eurozone has stabilised since its peak in 2009 and has recently even declined. In contrast to the strong economic performance before the crisis years, the current upswing is therefore not driven by debt. However, in historic comparison, the debt level is still high and the trends in the various countries are heterogeneous.

One of the most important concerns of the new US Government is tax reform. High marginal effective tax rates, a laboriously defined tax base, complicated regulations and a large number of loopholes have led to high administrative costs. Discussions are focusing on destination-based cashflow taxation. This would ultimately place pressure on foreign companies to relocate production to the USA.

On 8 November 2016 a new President will be elected in the USA. Throughout the protracted and often controversial election campaign, questions of economic policy have only occasionally been at the forefront – in spite of the strongly divergent standpoints of the candidates. At present, opinion polls suggest that Hillary Clinton will be elected, which would result in a continuation of current economic policy. Although the election result is uncertain, the economic implications are expected to be minor.

Are stock market excess returns in ten industrialised countries only predictable by means of lagged U.S. stock returns? “It depends” would be the right answer. The claim stands the test in recession but not in normal times, as shown in a new KOF Working Paper.

The pace of the Eurozone economy has slackened. Given a rather moderate 0.3 per cent increase in production over the previous quarter, gross domestic product (GDP) expanded more slowly in the second quarter 2016 than in the preceding quarter. In France and Italy, aggregate production even stagnated.