How the Swiss Economy is Coping with COVID-19?

The Swiss government’s economic support program has helped Switzerland avoid a wave of companies going bankrupt or out of businesses due to the implications of the coronavirus COVID-19 pandemic, according to a recent report by the KOF Swiss Economic Institute.

The number of companies that went out of business actually declined by 20% between March and July of this year compared with the same period last year.

Nevertheless, this could not prevent the economic downturn, which became a global issue due to the challenges of facing the pandemic.

“The number of bankruptcies has not been significantly higher than expected in any major region or sector of the economy,” the report said as cited by SwissInfo.

Accordingly, volatile industries such as hospitality and entertainment experienced a small impact from the pandemic.

The program included measurements such as a large lending program, coupled with a ban on debt collection, starting from April in order to cope with COVID-19.

In addition, the program presented a compensation scheme for short working hours.

The number of people who worked shorter hours amounted to 890,890 in May, decreasing by 17% compared with the level registered in April, according to data by the Swiss State Secretariat for Economic Affairs (SECO).

Furthermore, the shorter working hours compensation scheme, which was used by nearly 110,000 companies were in May, helped reduce job losses due to the pandemic.

The program aims at reducing the slump in demand during the current circumstances, according to remarks by the Minister of Finance, Ueli Maurer.

The use of the program witnessed a decline of 16% in May compared with April, when the crisis was at a more challenging stage and led to job cuts around the world and a the steepest point in the economic downturn.

Meanwhile, unemployment rate in Switzerland stabilized at 3.2%, according to non-seasonally adjusted for the month of June.

However, the number of the unemployed people at 148,870 remains higher by 53% compared with the same period in 2019, according to the most recent by SECO.

The Swiss gross domestic product (GDP) is expected to fall by around 6.2% this year, according to a recent report by SECO, marking the worst downturn for the economy of Switzerland since 1975.

Moreover, unemployment could rise as high as 3.8% in 2020.

The June forecasts for the GDP contraction were better than the 6.7% economic downturn that SECO expected in April.

On the other hand, the Swiss government reportedly expects a gradual economic recovery in the second half (H2) of 2020 and next year.

A growth rate of 4.9% is expected in 2021, but losses of $100 billion are expected to be recorded in production due to the COVID-19 negative impact on the economy, according to recent estimates by economic experts.

A recovery next year would highly depend on the change in the current circumstances, with a second wave posing a risk for the anticipated economic recovery, as in this case, the market could face a larger number of job cuts unless a proper repose is provided.