Anti-COVID measures gone, Switzerland will start racing

Swiss GDP is expected to rise by 3% and unemployment to fall gradually to an annual average of around 3.3% by the end of 2021

After the gradual relaxation of anti-COVID measures, Switzerland’s economic recovery will be swift. This is stated in the economic forecast of the Swiss federal government’s group of experts drawn up in March 2021.

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The task force of analysts essentially confirms its previous assessment. GDP is likely to fall in the current first quarter, but thereafter the relaxation of the anti-COVID measures should lead to a rapid recovery – uncertainty remains exceptionally high in any case.
Since the end of 2020, the tightening of anti-COVID measures has weighed heavily on sectors of the economy. Some service sectors have experienced a slump in activity.

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The group of experts therefore expects a strong decline in the GDP of Switzerland for the current first quarter. So far, however, there is nothing to suggest a collapse of similar magnitude to that of the first wave last year.
Epidemiological developments permitting and if it is possible to relax the anti-COVID measures in accordance with the planned steps, the national economy should recover very quickly.

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Consumers will then rediscover various spending options, which were not feasible in the winter months, and this will boost sales in the sectors concerned.
In parallel, the increase in world demand should support the export branch. The utilization of production capacities will increase accordingly, which will have a positive effect on investment activities in Switzerland.

For the whole of 2021 GDP growth of 3%.

Overall, the Expert Group expects GDP growth for the whole of 2021 of 3.0% excluding sporting events (unchanged forecast).
In other words, the Swiss economy would grow at a rate above the historical average and exceed the pre-crisis GDP level towards the end of 2021.
Unemployment is expected to decline gradually to an annual average of 3.3% in 2021 (unchanged forecast).

Economic forecast forecast Switzerland (german)

This scenario assumes the substantial implementation of the easing measures from the spring months of 2021 onwards, without the need to tighten the measures with a strong impact on the economy.
Under these circumstances, the subsequent economic recovery should also gain in magnitude. Even highly exposed economic sectors such as international tourism should gradually emerge from the current crisis.

Excluding sporting events, GDP up by 3.3%.

For 2022 the expert group therefore expects an above-average GDP growth of 3.3% excluding sporting events.
Compared to last December’s estimate (3.1%) the international environment appears to be somewhat more favourable and this can only be beneficial for Swiss exports.
In the wake of the economic recovery, employment should clearly increase and unemployment should fall to an annual average of 3.0% (unchanged forecast).
The greatest uncertainties are related to the coronavirus pandemic, the possible reactions of economic players and politicians and second-round economic effects.
Indeed, if Switzerland and its major trading partners were to adopt severe containment measures in the coming months, for example due to delays in anti-COVID vaccination programs, the recovery would get off to a very slow start.
Nor can it be ruled out that the pandemic will affect economic performance until 2022, for example with the spread of coronavirus variants that reduce the effectiveness of existing vaccines.

Risk of job cuts or insolvency of companies

There could also be second-round economic effects that are stronger than assumed by the expert panel, such as massive job cuts or corporate insolvency. The risks associated with the indebtedness of states and companies would also intensify.
However, the international coronavirus situation could develop more favorably than expected, in particular due to the acceleration of vaccination programs.

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Under this condition, the recovery in 2021 could exceed the expectations of the expert group, supported in particular by pronounced recovery effects in private consumption.
In addition, the international trade conflict poses risks for the global economy; in relations between Switzerland and the EU a certain hesitancy can be observed with regard to the institutional agreement; finally, in Switzerland the risk of strong corrections in the real estate sector remains.