How do Switzerland’s Covid billions measure up internationally?

Restaurant staff in Bern making sure tables are two metres apart on May 11. The bulk of government credit is for transitional loans for small and medium-sized businesses. Keystone

Most governments have announced unprecedented levels of public spending to support their economies in the face of the coronavirus crisis. With its CHF65 billion ($66.9 billion) plan, Switzerland is among the countries that are freeing up the most funds. 

The coronavirus pandemic has led to a collapse of activity in many sectors around the world. The International Monetary Fund (IMF) expects the global economy to contractExternal link by 3% in 2020, which it says would be “the worst recession since the Great Depression” of the 1930s – far worse than the financial crisis of 2008.

+ ‘Switzerland is going to face an unimaginable level of poverty’

In an attempt to limit the damage to the economy and create the conditions for recovery, most governments have taken unprecedented measures to support households, businesses and financial markets. The Organisation for Economic Co-operation and DevelopmentExternal link (OECD), for example, reports that all of its 37 member countries have announced some form of financial support for businesses, the vast majority of which are supplementing the incomes of workers hit hard by the crisis. 

The scale of such plans is unprecedented: at the end of March – other measures have since been announced – the financial information site Barron’s already estimated that the total cost of these extraordinary packages could exceed $10 trillionExternal link (CHF9.7 trillion). 

In Switzerland, parliament met in an extraordinary session on May 4 and gave the go-ahead for the release of CHF57 billion in urgent credits to deal with the coronavirus crisis. Never before has parliament had to decide on such a large amount.

A debt of up to CHF8 billion is still expected to be incurred for short-time working compensation, bringing the potential impact of the crisis on federal finances to more than CHF65 billionExternal link. 

International comparisons are difficult to make. This is partly because policy responses are influenced by a variety of country-specific circumstances. They depend, for example, on the social safety nets that existed before the crisis. It is also because not all measures are equal: some are additional and unforeseen public expenditures that will never be compensated, while others consist of loans or deferrals of payments that sooner or later will be due. 

As an indication, however, it can be said that Switzerland ranks among the countries with the highest share of wealth devoted to fiscal measures and exceptional public spending, according to an IMF analysisExternal link. Based on the estimates provided by the IMF, swissinfo.ch has calculated that the average share of GDP devoted to such plans is 6.8% in the OECD. In Switzerland it is more than 9%.

Switzerland is also one of the countries with the highest overall amount of such measures in terms of population (around CHF7,500 per capita), behind only Luxembourg (in first place with CHF17,500 per capita in a country of 626,000 inhabitants) and Japan (over CHF8,400 per capita).

At the global level, Japan and the United States are among the countries that have mobilised the most funds, with packages amounting to trillions of dollars. In the United States, one of the key measures – and also one of the most expensive in the stimulus package – is direct aid to all Americans in a certain income bracket. 

Japan is the country that is spending the largest share of its GDP (21%), with a package of measures amounting to more than 117 trillion yen (more than CHF1 trillion). In particular, it includes direct payments to households and small and medium-sized businesses (SMEs) to the tune of 6 trillion yen. 

On the European side, the Luxembourg plan includes various additional public spending measures amounting to more than CHF2 billion. Measures to support companies and the self-employed in their liquidity needs account for the bulk of the plan (more than CHF8 billion), following the example of Switzerland.

(Translated from French by Thomas Stephens)