Record Shortfall of Switzerland’s Budget for 202113 August 2021
Switzerland’s budget will post a record shortfall of CHF17.4 billion ($18.9 billion) this year, as early data shows. Last year, there was a deficit of CHF14.2 billion.
The Swiss Parliament has approved CHF21 billion in extraordinary expenditure aimed at battling the effects of crisis caused by COVID-19 pandemic in 2021. However as per latest calculations, only CHF16.4 billion of this sum will be needed. The country plan to spend this money on funding for employees who are on shorter working hours due to COVID-19 and to support businesses that were hit the most by the pandemic. Also acquisition of vaccines and conducting test for coronavirus will be funded from that budget.
Record Deficit and high CHF exchange rate
The extraordinary expenditure will heavily impact Switzerland’s budget. Even though there is expected a boost in corporate profit tax receipts, the overall tax yield won’t be enough to cover typical state spending requirements – there will be lacking around CHF2.4 billion. Surplus central bank profits of CHF1.4 billion will pose some relief. But overall, taking all this into the account, the preliminary figures presented by the government show that there might be a record deficit of CHF17.4 billion this year. The final figures will be impacted by the course of the pandemic in the third and fourth quarter of the year. Figures for last year, that were confirmed in April, showed a deficit of CHF14.2 billion. The pandemic started last year, and for any months there was a lockdown of business in Switzerland. Also, the difficult situation made investors eager to buy Swiss francs, which resulted in very high CHF exchange rate. Good exchange rate CHF hurt Swiss economy that heavily rely on export.
How is now looking situation in terms of the pandemic in the country? Sadly, since the end of June number of new cases has been rising as the more infectious Delta variant is spreading. The number of new cases rebounded to more than 2,000 per day. Hospitalizations remain at a low level. On August 11, the Swiss government said that as situation is uncertain it is too soon to lift remaining pandemic restrictions, like obligatory wearing masks in public spaces. The situation will be re-evaluated in September. At the same time, the government is trying to put pressure on residents that refuse to get vaccinated. It plans to stop funding tests for unvaccinated people who need to attend some event like football matches. As of now the vaccination rollout has slowed down in the country, and just under 50% of the population have been fully vaccinated with two jabs.