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Swiss Economy Shrinks At Record Pace In Q2

swiss nov29 27aug20 lt

Switzerland's economy contracted at a record pace in the second quarter as economic activity was severely restricted amid the coronavirus pandemic but the pace of fall was less than economists' expected, official data showed Thursday.

Gross domestic product fell 8.2 percent sequentially in the second quarter after falling 2.5 percent in the previous quarter, the State Secretariat for Economic Affairs, or SECO, reported.

This was the sharpest fall since records began in 1980. Economists had forecast a larger contraction of 8.6 percent.

Compared to the situation in the fourth quarter, before the coronavirus crisis, GDP slumped by a total of 10.5 percent in the first half of 2020.

On a yearly basis, GDP declined 9.3 percent in the second quarter versus a 0.7 percent drop in the first quarter and economists' forecast of -9.6 percent.

The production-side breakdown showed that the sizeable increase in pharmaceutical turnover prevented an even steeper slump in total manufacturing. Manufacturing output plunged 9 percent amid sharper falls in machinery and metals, precision instruments and watch-making.

The service sector was hit hardest by the health policy measures taken to contain the pandemic, data revealed.

In the second quarter, accommodation and food output plunged 54.2 percent and trade dropped 3.6 percent. Finance and insurance declined 2 percent and business services slid 8.6 percent.

Arts, entertainment and recreation fell 18.8 percent and health and social activities slid 8.6 percent. Meanwhile, public administration rose 0.2 percent.

On the expenditure-side, only government spending expanded from the first quarter, which was up 0.2 percent.

As a result of shop, bar and restaurant closures and other restrictions, particularly in healthcare and travel, spending nosedived in most consumer sectors. Private consumption declined 8.6 percent.

Equipment and software investment plunged 11.7 percent and construction investment dropped 4 percent. Exports of goods decreased 9.4 percent and that of services plunged 15.9 percent.

Likewise, imports of goods decreased 14.3 percent and that of services slid 22.2 percent in the second quarter.

In June, the expert group of the federal government projected the economy to shrink 6.2 percent in 2020, confirming the sharpest contraction in decades. Nonetheless, the economy is expected to recover next year, with GDP rising 4.9 percent, assuming that no renewed intensification of the health policy measures becomes necessary.

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