Swiss economy to suffer worst downturn since 1975

Government economists say the downturn will be less severe than they initially feared. © Keystone / Christian Beutler

Switzerland's economy is expected to experience its sharpest downturn in decades this year due to the coronavirus pandemic, the government said on Tuesday.

Gross domestic product will drop 6.2% in 2020, the State Secretariat for Economic Affairs (SECO) said on TuesdayExternal link, in the worst downturn since 1975.

Government economists predict unemployment to rise to 3.8% this year, as foreign trade suffers, consumer spending shrinks and companies emerge slowly from lockdown.

The SECO forecast was nonetheless a slight improvement from the 6.7% GDP downturn predicted in April.

The government expects a gradual recovery during the second half of 2020 and into 2021 (expected GDP growth 4.9%). But this will depend on numerous factors such as whether there is a second wave of the disease followed by severe restrictions, and assuming that lay-offs and corporate bankruptcies remain limited and that demand from abroad slowly returns to normal levels, SECO said.

Government economist Ronald Indergand told Reuters that Switzerland’s economy could lose more than $100 billion in output due to the fallout from the coronavirus pandemic.

“On a per capita basis the downturn is going to be as bad as the mid-1970s, if not worse,” said Indergand. “It is going to take years to get over this. The economy is only going to get back to its previous level by 2022.”

Meanwhile, the KOF Swiss Economic Institute at ETH Zurich said on Tuesday that it expects GDP to fall by 5.1%, compared to an earlier forecast of 5.5% (May estimate). It said GDP should increase by 4.3% in 2021, significantly less than an earlier estimation.