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Swiss Economy Set For Worst Slump Since 1975: SECO

Switzerland's economy is set for its worst slump since 1975 this year due to the impact from the coronavirus, or Covid-19, and a revival is likely in the second half of the year, if there is no second wave of the pandemic, the Federal Government's Expert Group said in a report released on Tuesday.

Gross domestic product adjusted for sporting events is forecast to fall by 6.2 percent this year, which is slightly better than the 6.7 percent decline predicted in April, the State Secretariat for Economic Affairs, or SECO, said.

That would be the worst slump since 1975, the SECO added.

The unemployment rate is expected to average 3.8 percent this year.

Experts expect private consumption to remain subdued for the rest of the year due to the high uncertainty surrounding the pandemic and also projected a significant reduction in investment in machinery amid the underutilized production capacity and deterioration in businesses' financial situation.

The Swiss economy is likely to grow 4.9 percent in 2021, which is smaller than the 5.2 percent expansion predicted in April.

This projection is based on the assumption that no renewed intensification of the health policy measures becomes necessary, that the second-round economic effects in the form of lay-offs and corporate bankruptcies remain limited and that demand from abroad returns to normal levels gradually.

However, the labor market is expected to improve only very slowly and the unemployment rate is forecast to climb further to 4.1 percent next year. Employment is expected to log only a minimal rise.

"The course the economy will take hinges on the progression of the pandemic," the SECO said. "Forecast uncertainty therefore remains extraordinarily high."

Further, the risk of upheaval on the financial markets and further upward pressure on the Swiss franc is high amid rising debt levels and the risk of defaults and insolvencies, globally, the report added.

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