Swiss GDP to Suffer Worst Slump Since 1975

Revised Forecast

                Due to the pandemic outbreak, the Swiss federal authorities have revised the forecast for GDP in 2020 – it will fall by 6.7%, only to recover a bit in 2021. The State Secretariat for Economic Affairs (SECO) had adjusted its economic forecast taking into the account that sporting events are affected by the pandemic and cancelled or postponed. Originally, the forecast was that GDP will contract by 1.5% in 2020. A slump of 6.7% will be the biggest contraction of GDP since 1975 in Switzerland. If no further restrictions are imposed, the Swiss economy should recover a bit in 2021 and the GDP should grow by 5.2%. The prediction of SECO is much harsher than the one of BAK Economics Institute, that sees the GDP to feel by 2.5% in 2020. Meanwhile the unemployment in Switzerland is expected to fall average by 3.9% over the year, and to rise in 4.1% in 2021.

Easing of Restrictions

                The forecast will be accurate if modest recovery of the economy happens due to the easing of measures imposed in Switzerland in the next few months. However, still unemployment rate and income losses combined with the economic uncertainty means the economy will be heavily affected and private consumption limited in the second half of the year. Additionally, rising government debt in many countries and turmoil on the financial markets will influence real estate industry in Switzerland. The decision to postpone the Olympic Games and move another major events to other dates will have huge influence on the Swiss economy.

Financial Aid Package

                The Swiss government is trying to help businesses and the economy by providing financial aid package. The economic lookdown is leading to many bankruptcies among companies, fintech, biotech IT startups. With the unemployment rate going up, many people turn to social aid. There has been observed a spike in social assistance requests – the number of them quadrupled in first two weeks of the exceptional situation announced by the Swiss government. The data was provided by the Zurich University of Applied Science. According to research, most affected are hourly wage employees, self-employed and part-time employees, both cross-border workers and residential ones.

Strong Franc

                The coronavirus pandemic is making Swiss franc exchange rate going up. Strong CHF is not good news for the economy, especially tourism. According to predictions tourism in Switzerland might recovered only in one year. One of the key industries for Swiss economy’s, in 2018 provided revenue of CHF44.7 billion, making for 3% of GDP. This year tourism industry is expected to have revenues lower by 35%, according to estimates by SECO. That is why Swiss federal government is mulling the introduction of additional financial package especially for Swiss tourism to provide boost for it in times of trouble.