Swiss economy expected to shrink by worst rate in decades

Swiss gross domestic product will fall 6.2% this year, the State Secretariat for Economic Affairs (SECO) said, the worst downturn since 1975, when the country was hit by the aftermath of the oil price shocks. Unemployment is forecast to rise to 3.8% this year, as foreign trade suffers, consumer spending shrinks and companies emerge slowly from shutdowns imposed to halt the spread of the COVID-19 virus.

Switzerland's economy will suffer its worst downturn in decades during 2020 as the coronavirus pandemic damages output and jobs, the government said on Wednesday, but the downturn will be less severe than initially feared. Swiss gross domestic product will fall 6.2% this year, the State Secretariat for Economic Affairs (SECO) said, the worst downturn since 1975, when the country was hit by the aftermath of the oil price shocks.

Unemployment is forecast to rise to 3.8% this year, as foreign trade suffers, consumer spending shrinks and companies emerge slowly from shutdowns imposed to halt the spread of the COVID-19 virus. Still, the forecast was a slight improvement from the 6.7% downturn in GDP foreseen by the Swiss government's economists in their April statement and compares favorably with other European countries.

The Organisation for Economic Co-operation and (OECD) says Britain could suffer an 11.5% slump this year. Downturns of 11.4% are expected in France and 11.3% in Italy. The Swiss government expects a gradual recovery during the second half of 2020, provided a massive second wave of the disease along with severe restrictions that do not occur.

In 2021, SECO forecasts underlying economic growth of 4.9%, although unemployment will remain high by Swiss standards at 4.1%. "Switzerland's economy has been fairly resilient in an international comparison," said Gero Jung, chief economist at Mirabaud bank.

"Switzerland has been very quick to respond to the crisis, with the government's stimulus package being massive, totaling more than 60 billion francs ($63.22 billion) or close to 10% of domestic GDP," he said. More than 15 billion Swiss francs in emergency loans have also been handed out to nearly 130,000 businesses. Some 1.9 million people - or 37% of the workforce - have applied for short-time working compensation.

The Swiss lockdown to prevent the disease's spread was also less severe than in other countries, while the country's large pharmaceuticals sector has continued to thrive. ($1 = 0.9490 Swiss francs)