Worksheet

International and monetary environment

Global economy

In the first quarter of 2021, further waves of infection and associated containment measures significantly curbed the pace of global economic expansion. The services sector was again particularly hard hit. The manufacturing sector, by contrast, saw dynamic expansion.

There were also considerable differences between the major economic areas: the US and China saw renewed growth; in the euro area, and also in Japan and the UK, economic output contracted.

Monetary developments

In the last three months, inflation increased in many countries, in some cases significantly. This was primarily due to the strong positive base effect of oil prices, which declined last spring before increasing again recently thanks to the rapid economic recovery.

Major advanced economies continue to pursue extraordinarily expansionary monetary policies. The financial markets are confident about the further course of the economy. The Swiss franc has depreciated.

Questions on the international and monetary environment

Economic situation in Switzerland

Overview

The fourth quarter of 2020 and the first quarter of 2021 were dominated by the second wave of coronavirus. The recovery in the Swiss economy was interrupted. Private consumption declined. The markedly positive development of manufacturing prevented an even more serious economic downturn.

Gross domestic product

GDP (adjusted for sporting events) declined 0.6% in the first quarter of 2021, a very similar decline to in the euro area (−0.6%). An economic downturn on a similar scale to the one that occurred during the first wave of the coronavirus in the spring of 2020 did not materialise.

Labour market

Since March 2020, the impact of the coronavirus crisis on the labour market has varied from sector to sector. Hospitality has been particularly hard hit, suffering a much stronger increase in unemployment than any other sector.

The nationwide rate of unemployment in Switzerland reached an interim high of 3.4% at the end of February 2021 before declining slightly to 3.2% by the end of April.

Prices

In the last three months there has been a significant increase in consumer price inflation; in April the rate was positive again (+0.3% after −0.5% in January) for the first time since the outbreak of the pandemic.

Questions on the economic situation in Switzerland

Economic forecasts

Overview

Provided that the planned easing of measures can be implemented as intended, the economic recovery is likely to become more widespread as time goes on. In particular, consumer sectors that were severely restricted for a long time due to the pandemic should experience considerable catch-up effects. This would increasingly enable areas of the economy that have been heavily affected, such as accommodation and food services (also known as hospitality) and events, to find their way out of the current crisis too.

GDP forecast

Overall, the Expert Group expects growth in GDP adjusted for sporting events of 3.6% in 2021 (March forecast: 3.0%).

The Swiss economy would therefore grow at a significantly above-average rate by historical standards, meaning that GDP would climb well above the pre-crisis level in the second half of 2021. As a result, companies are predicted to increase their investments and expand their workforces.

For 2022, the Expert Group is also forecasting above-average growth in GDP adjusted for sporting events of 3.3% (unchanged forecast). Foreign trade is set to stimulate growth substantially again, supported by the ongoing economic recovery in the major economies.

International trade in services such as tourism, in particular, is likely to gather pace. In Switzerland, momentum should gradually return to normal after a strong recovery this year.

Labour market

Given the stronger GDP growth, the labour market can also be expected to recover. Short-time working is likely to be reduced gradually and unemployment should fall further.

The unemployment rate is expected to come to an annual average of 3.1% for 2021, declining further to an annual average of 2.8% in 2022.

Questions on the economic forecast

Risks

Second-round effects

The risk of stronger economic second-round effects of the crisis such as insolvencies and large-scale lay-offs remains, and would result in much weaker development in demand. Any setbacks in the progression of the pandemic, resulting from virus mutations, for example, could also weigh additionally on the economy. Recovery would be more sluggish than forecast.

Strong catch-up effect

Conversely, the economy could also recover more strongly than assumed in the Expert Group’s forecast, both in Switzerland and in other developed economies. This is particularly likely with regard to private consumption, as some households accumulated significant additional savings last year, which could at least partially be used for consumer spending.

Inflation and rising interest rates

If demand develops strongly, this could lead to capacity bottlenecks and drive up inflation. Should this result in persistent pressure on prices with rising long-term interest rates, economic recovery is likely to experience curbing effects. The risks linked to government and company debt and to corrections on the financial markets would grow considerably in a scenario like this. Existing risks in the Swiss real estate sector would also become more serious.

Further risks

In the medium term, a number of other risks for Switzerland as a business location have increased. Uncertainty in its relationship with the EU has grown in particular.

Questions on the risks