Swiss economy suffers worst slump in 45 years

Empty shops and high streets have contributed to an economic contraction in Switzerland. Keystone / Laurent Gillieron

Switzerland’s economy shrank 2.9% last year as a result of Covid-19, the worst annual contraction since the aftermath of the oil crisis in 1975.

But official figures show that the second wave in the autumn had a less harmful effect on the economy, with the economy growing 7.6% in the third quarter before slowing to +0.3% in the last three months of the year.

The pandemic has directly affected a wide array of businesses and jobs – more so than the financial crisis that resulted in a GDP contraction of -2.1% in 2009.

In December, the Organisation for Economic Co-operation and Development (OECD) forecastExternal link a global gross domestic product (GDP) contraction of -4.2%. The eurozone is predicted to decline by -7.5%. Put into this perspective, it appears that the Swiss economy has weathered the pandemic better than its neighbours and many other countries. Out of the major economies, only China saw growth of 2.3% in 2020.

The worst affected industries in Switzerland last year were unsurprisingly the hospitality sector (-20.8%) and arts, entertainment and recreation (-7.7%), the State Secretariat for Economic Affairs (Seco) reported on FridayExternal link.

Household spending fell significantly in 2020 as shops, restaurants, bars and leisure facilities were forced to close their doors. Another contributor was unemployment, which rose to a decade-high 3.7% by the end of January this year.

Government spending rose considerably as the state was forced to bail-out the economy with wage subsidies, emergency loans to businesses and a range of other expenses.

Coronavirus had a reduced impact on the financial and construction sectors in Switzerland, which saw marginal growth in 2020. The manufacturing sector was also less affected by Covid-19 than the 2008/9 financial crisis, according to Seco. Manufacturing output even increased by 1.4% in the last three months of 2020, having suffered a rough time earlier in the year.

Earlier this week, the electrical engineering, machine building and metals industry group Swissmem expressed optimism that manufacturing output could be increased in the coming months, thanks largely to increased trade with China.

Seco will give its economic forecast for 2021 on March 11.