An updated forecast published this week by the Switzerland’s federal government is less negative than forecasters feared in the middle of the year.
The new forecast expects Swiss GDP adjusted for sporting events to fall by 3.8% in 2020 and unemployment to average 3.2% across the year. The forecast in June 2020, predicted a 6.2% fall in GDP and average unemployment of 3.8%.
After the relaxation of health policy measures, the Swiss economy started to swiftly make up lost ground at the end of April, with both consumer and investment demand exceeding expectations in the second quarter and much lower partial unemployment than anticipated in June. Overall, the first half of 2020 was less negative than assumed in the June forecast.
The forecasters expect the recovery in the second quarter to have continued into the third. Some sectors of the economy, including parts of accommodation and food services, were supported by high numbers of Swiss people holidaying domestically. Other industries with a greater dependence on the global economic cycle or with more reliance on international visitors have not recovered as well.
In September 2020, 50,000 more people were out of work than at the same time a year ago.
However, the outlook for 2021 has weakened. GDP growth of 3.8% is now predicted in 2021, compared to the 4.9% predicted in June.
The forecast slump in 2020 and expected rise in 2021 combined suggest Swiss GDP might return to pre-pandemic levels by the end of 2021.
However, the latest forecast assumes there are no widespread coronavirus restrictions going forward. The recovery would be interrupted if widespread business and border closures around the world returned, something that would significantly increase the probability large job cuts and corporate insolvencies.
Other risks include international trade conflict and a correction in the Swiss real estate market. A hard Brexit could affect the Swiss economy by creating upheaval in the financial markets and further upward pressure on the Swiss franc, said the report.