Forecast: 2020 economic slump less serious than feared

The Expert Group is expecting the Swiss economy’s recovery to have continued in the third quarter. Some sectors of the economy, including parts of the accommodation and food ser-vices, were supported by the low numbers of Swiss people travelling abroad. Other industries have not recovered as much due to greater dependence on the global economic cycle(such as parts of the manufacturing sector) or being more directly affected by the coronavirus pan-demic and the measures implemented (such as international tourism and major events). The economic recovery therefore remains incompleteand the previous year’s levels have not been reached in most sectors. In September, almost 50000 more people were unemployed than a year earlier.

For 2020 as a whole, the Expert Group is anticipating a decline in GDP of 3.8% (June fore-cast: –6.2%).This would be the strongestdecrease in GDP since 1975.The labour market is expected to see further drops in employment and the average unemployment rate for 2020 is likely to be 3.2% (June forecast: 3.8%).

As time goes on, the Swiss economy should continue to recover at a moderate pace. The Expert Group is expecting GDP adjusted for sporting eventsfor 2021to grow by 3.8%(June forecast: 4.9%). Switzerland’s economic output would therefore return to its pre-crisis level only towards the end of 2021, assuming that no further widespread lockdown is imposed in Switzerland or in key trading partner countries. Consumption expenditure and spending on investments within Switzerland should then recover gradually, despite the adverse effects of losses of income and the persistently high level of uncertainty.

Comparison of forecasts of October 20 and June 20

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Exogenous assumptions

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Economic risks

The most significant economic risks are still those linked to the coronavirus pandemic and the responses of economic players and politicians to the situation.

On the one hand, the uncertainty could have a less negative impact on consumer and invest-ment behaviour than the forecast assumes, or could reduce considerably due tothe authori-sation of vaccines, for instance. A much more rapid economic recovery would then be ex-pected.

On the other hand, the recovery would be interrupted in the event of renewed widespread business and border closures around the world. This would significantly increase the probabil-ity of second-round economic effects such as large numbers of job cuts and corporate insol-vencies. The risks linked to the continued rise in government and company debt would also grow.

The international trade conflict posesfurther risks to the global economy. A «hard»Brexit, which appears more likely based on recent events, would be another blow to the fragile econ-omy. The risk of upheaval on the financial markets and further upward pressure on the Swiss franc also remains high.

Finally, there is still a risk of more major corrections in the Swiss real estate sector.

Monetary assumptions, Labor market forecasts

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