The COVID-19 crisis is hitting the Swiss economy hard
Switzerland is facing an unprecedented economic downturn. Many governments responded to the COVID-19 pandemic by imposing major restrictions on their societies and economies in March, prompting a significant decline in global trade and in the demand for Swiss exports. The Swiss government, too, shut down much of public life in the country, with a considerable impact on the domestic economy.
The Swiss State Secretariat for Economic Affairs (SECO) assumes that manufacturing output will fall by around 25% of total economic added value compared to 2019. If Switzerland moves into a V-shaped recession (a major downturn followed by a rapid recovery), SECO estimates that GDP will decline by 7% in 2020 and the rate of unemployment will rise to 4% (from 2.3% in 2019). In the case of a more severe recession (a major downturn followed by a weak recovery), the decline in GDP could be as much as 10%, with unemployment rising to 4.5%.
Although the scale of the economic downturn cannot yet accurately be quantified and the estimates involve considerable uncertainty, it is already clear that the COVID-19 crisis has hit the Swiss economy extremely hard, with a big impact on both employers and employees. This is the major finding of a Deloitte survey of a representative sample of 1,500 working age individuals in Switzerland. The survey was conducted in mid-April.
The self-employed: three-quarters are losing out, with just a few winners
The survey finds that 18% of self-employed individuals have had to close their business and 21% are still trading but have seen business drop to zero. A further 38% report a decrease in business. This means that the COVID-19 pandemic has so far had a negative economic impact on just over three-quarters (77%) of all self-employed individuals in Switzerland. However, 10% report an increase in business, enabling them to benefit from the crisis, while the remaining 21% say the crisis has not yet had any impact on their financial position.
The flood of applications for business loans demonstrates how serious the situation is for businesses, especially small and medium-sized enterprises (SMEs). By mid-April, more than 100,000 SMEs had successfully applied to the loan programme launched by the Swiss Parliament in cooperation with banks, with loans totalling more than CHF 16 billion. By comparison with other countries, Switzerland has intervened fairly rapidly to support SMEs and has kept bureaucracy to a minimum, helping to prevent a wave of insolvencies – at least for the time being.
Employees: many move to home-working
Employees have been massively affected by the COVID-19 crisis. The Deloitte survey shows that almost two-thirds of Swiss employees (63%) have seen a negative impact: more than half of those workers have had to reduce their hours, 27% have had overtime cut, 24% have lost their annual leave, and 2% have lost their jobs.
The extent to which individual employees are affected depends on a number of factors. One is likely to be how the lockdown has restricted activity in their sector and how severely a particular occupation is impacted by the measures the government has taken. With just a few exceptions – most notably the health sector – this depends mainly on whether a particular occupation relies on close physical contact. Economists from the University of Basel recently showed that the more heavily dependent a sector is on close physical contact, the more negatively it is likely to be affected in terms of unemployment.
The percentage of employees working from home is a further indicator. Although certain occupations involve direct physical contact and have had to be suspended, some – such as the roles of customer adviser or careers coach – can move to online delivery. The Deloitte survey shows that in sectors in which a high proportion of the workforce works from home, only small numbers of employees have had their hours reduced to zero and been moved on to short-time work compensation payments or have actually lost their job. In other words, the better suited a sector is to home-working, the smaller the impact on the workforce. In such cases, working from home is cushioning the impact of government restrictions.
Looking forward: the crisis is far from over
The crisis has already had a dramatic impact on the Swiss economy, but the country has been able to mitigate some of the economic consequences by rapidly making loans available to many companies and enabling significant numbers of employers to apply for short-time working compensation, while many employees are working from home.
However, the crisis is far from over. The Deloitte survey indicates that 24% of self-employed businesses expect to become insolvent and 19% of those in employment expect to lose their job in the near future.