Swiss Economy to Expand After It Shrank in Q1

Second Lockdown

              From late December and mid-January Switzerland’s federal government has started imposing again restrictions in order to curb the spread of the virus. They were only starting to be eased from early March. This months long second lockdown with closed shop, museums, restaurants, and cafes (those were allowed to open just from late April and only outdoors in the beginning) harshly impacted the economy as data now shows. Public life is slowly re-opening. From May 31 restaurants can serve clients also indoors. Still for hotels, restaurants sector there is long way to recover. Especially that foreign tourists have not come back just yet.

GDP Down in Q1

              In the first quarter Swiss economy contracted due to the second lockdown, less consumption and partially closed service sector. The gross domestic product went down by 0.5 percent, comparing to some modest growth of 0.1% in the previous quarter at the end of 2020, as the State Secretariat for Economic Affairs said. The Q4 2020 data was revised down, which means Switzerland only narrowly avoided double-dip recession for 2020 as GDP for the whole year was minus 2.9%. Apart form lockdown Swiss economy was hurt by very high exchange rate of Swiss franc. The overpriced CHF is bad for export-driven Swiss economy. In difficult times investors tend to buy Swiss francs which is safe-haven asset and thus trigger high exchange rate of it.

Could Be Worse

              Nevertheless the economic situation in the country last year and in Q1 could be worse. For 2020 many countries of eurozone noted much worse GDP. This year the result was impacted by tragic situation of restaurants and hotels, but the industry grew sharply and prevented GDP from much worse decline. That is why Switzerland didn’t experience similar economic slump to that of spring 2020 when the pandemic broke out, as reports SECO.

Path to Recovery

              The are signs that the recovery is on the horizon. Public life is reopening and thus service sector and consumption will pick up from now on. Also, there is continuously observed a comeback in Swiss manufacturing that is reporting some great results. Unemployment is prevented from hitting higher number by furlough programs. Additionally, foreign trade, especially export of pharmaceutical products which Switzerland is famous for, widely support the economy.

Positive Outlook

              KOF Swiss Economic Institute is giving very positive outlook for Swiss economy for 2021. For May the KOF Economic Barometer stands at 143.2, 6.8 points higher than reading for April. Provided the vaccinations program is going smoothly and the coronavirus is contained, the progress of the economy is just a matter of time. As experts from the Swiss Federal Institute of Technology in Zurich (ETH Zurich) stated: “The slight decline that the barometer underwent in the second half of 2020 has been replaced by continuing strong increases in the spring of this year. Once again, the barometer is well above its long-term average.” Forecast of KOF is line with government’s predictions from March that after slow start in 2021 the economy will pick up and end the year with growth of 3%.