Recession in Switzerland: definition, characteristics, and impacts

A recession signifies a noticeable economic downturn—a topic that has gained relevance in Switzerland in 2025. Following recent global crises such as the COVID-19 pandemic and inflation-induced interest rate hikes, many Swiss citizens are questioning whether a recession is imminent and how to prepare for it.​

For those interested in investments, it's crucial to comprehend the phenomenon of recession and its potential impacts on the Swiss economy and personal finances. This article provides a clear and factual explanation of what a recession is, its defining features, and how Swiss investors can navigate a recessionary phase from an investment-oriented perspective.

What is a recession?

A recession is a phase of economic decline. Technically, it is defined by two consecutive quarters of negative growth in the Gross Domestic Product (GDP), which measures the total value of goods and services produced. A sustained decline over half a year indicates a recession.​

Recessions are part of the normal economic cycle: periods of growth are followed by downturns before recovery ensues. It's important to distinguish between a temporary, technical recession and a structural recession, where fundamental changes in the economy lead to a prolonged downturn—such as technological shifts or the collapse of key industries.

Typical characteristics of a recession:

• Decline in economic output: Real GDP contracts over multiple quarters.

• Decreased consumption and investment: Consumers become cautious, and businesses reduce investments.

• Reduction in production and exports: Lower demand leads to decreased production. Export-oriented countries like Switzerland are particularly affected by global weaknesses.

• Lower corporate profits: Company revenues decline, leading to reduced profits.

• Muted inflation or deflation: Decreased demand can reduce price pressures. In Switzerland, inflation often remains low, partly due to the strong franc.

Economic research institutions like SECO and the KOF at ETH Zurich continuously analyse various indicators. For instance, the KOF Economic Barometer reached over 101 points in January 2024, suggesting potential recovery.​

Recession vs. Depression:

If a recession is exceptionally prolonged and severe, it is termed a depression. A historical example is the Great Depression of the 1930s. Such instances are rare, as modern economic and monetary policies aim to counteract downturns early.

Historical recessions in Switzerland

Switzerland's economy is not immune to recessions. Let's examine two recent recessionary periods and the lessons learned:

Financial crisis 2008/2009: a global shock hits Switzerland

The financial crisis began in the USA but quickly spread globally, affecting Switzerland as well. The export industry and financial sector were particularly impacted. Companies reduced investments, orders declined, and the economy contracted.​

The Swiss National Bank lowered interest rates, the federal government supported a major bank, and launched stimulus programs. These measures helped prevent a deeper crisis. Stock markets reacted sharply but recovered significantly in subsequent years.​

Lesson learned: Such periods highlight the importance of a well-diversified investment strategy and maintaining composure. Long-term investors benefited from the recovery.

COVID-19 recession 2020: an unprecedented standstill

The COVID-19 pandemic led to an abrupt economic downturn in 2020, affecting Switzerland as well. Within weeks, large parts of public life were shut down. Tourism, gastronomy, and retail were severely impacted. Supply chains and exports also faced pressure.​

The federal government responded with the largest aid package in history, including bridging loans, short-time work, and immediate assistance. The Swiss National Bank stabilised the franc market. Thanks to this swift response, the recession was deep but brief.​

Lesson learned: Crises can emerge unexpectedly and intensely. Being prepared—financially and emotionally—helps weather such periods. Markets react swiftly in both directions.

Strategies to navigate a recession

While individuals cannot prevent a recession, they can prepare and mitigate its effects through smart strategies:

1. Solid personal financial planning

During prosperous times, lay the foundation to endure downturns. Build a financial cushion equivalent to 3–6 months of expenses in an easily accessible account to cover short-term income losses (e.g., job loss or reduced working hours). This avoids the need to sell investments hastily during a crisis.

Debt management: Aim to reduce consumer loans or credit card debts as much as possible. Such debts can become particularly burdensome during a recession, especially if interest rates rise or income becomes uncertain.​

Don't neglect retirement planning: Switzerland's retirement system is based on three pillars. The voluntary private pension (Pillar 3) can be beneficial even during crises.​

2. Diversification and defensive investment strategies

A well-founded investment strategy is invaluable during recessions. A key principle is diversification—spreading assets across various investment classes, industries, and regions. This is crucial because different asset classes often perform differently during a recession: while stock prices may fall, bonds or precious metals like gold can remain stable or even increase in value. A diversified mix helps offset losses in one investment with stability in another.

If you're uncertain about asset allocation, professional investment advice can help develop a strategy tailored to your needs and risk tolerance—typically through diversified portfolios comprising various asset classes.

3. Behaviour during crisis: stay calm and spot opportunities

Even the best strategy is ineffective if one panics during turbulent times. A composed, disciplined approach is key in a recession:

• Don’t panic

• Focus on long-term goals

• Review and, if needed, rebalance your portfolio

• Look for contrarian investment opportunities

• Maintain emergency savings and liquidity

• Keep emotions in check

In short: stay rational and disciplined. Don’t be swept away by the prevailing mood of pessimism. Recessions pass—and being prepared puts you in a strong position when the economy rebounds.

Outlook: what does the future hold for Switzerland?

Current assessments of Switzerland’s economic outlook are mixed but generally optimistic. There are few signs of a severe recession—many observers expect moderate growth instead.

Nevertheless, uncertainty remains high. Several factors could influence developments in the coming years:

• Interest rates: Monetary policy will play a key role. A potential loosening could support investment, whereas persistently high rates may dampen growth—especially in real estate and business sectors.

• Global influences: As an export-driven economy, Switzerland is closely linked to global markets. Economic fluctuations in Europe, the US or China directly impact demand for Swiss products.

• Leading indicators: Signals from industry, consumer behaviour and financial markets paint a mixed picture. While some areas remain stable, there are signs of caution. The outlook remains open.

• External shocks: Unexpected events—geopolitical crises, market turbulence, or global health threats—could always present new challenges.

What does this mean for households?

Even without an acute threat, a proactive approach is wise. Those who manage their finances well, build reserves and regularly review their portfolio are better equipped to face uncertainty.

Preparation also includes thinking through different scenarios—whether through continued education, a healthy liquidity buffer or discussions within your personal network.

Conclusion: Keep a long-term perspective

Recessions are part of the economic cycle—they are unpleasant, but temporary. Switzerland has shown resilience in the past, managing downturns with sound policy and stable structures.

For investors, this means: stay focused on the long term. Anyone with a 10, 20, or 30-year investment horizon will experience several cycles. What matters most is sticking to fundamental principles—diversification, regular saving, cost control, emotional discipline—and making adjustments when needed, without reacting impulsively.