REUTERS

Switzerland’s economy will shrink by 6.2% in 2020, the government said on Tuesday, the worst downturn in more than 40 years, as the country grapples with the consequences of the coronavirus pandemic.

A gradual recovery is expected during the second half of the year provided a massive second wave of the disease along with severe restrictions does not occur, the State Secretariat for Economic Affairs (SECO) said.

The forecast was a slight improvement from the 6.7% downturn in GDP foreseen by the government’s economists in their April statement.

Still, the downturn would be the worst since 1975, when Switzerland was hit by the aftermath of the oil price shocks, with unemployment forecast to rise to an average rate of 3.8% during 2020.

The sharpest point in the downturn will come during the second quarter of the year, when economic activity will have been affected by the restrictions for the longest period of time, SECO said.

In recent weeks Switzerland has allowed shops and restaurants to reopen, while on Monday it reopened its borders as the country slowly returns to normal.

“Thanks to the rapid decline in Covid-19 case numbers, the health policy measures could be eased somewhat more quickly from the end of April than had been assumed in the most recent forecast,” SECO said.

“The short-term prospects have therefore brightened compared with the April forecast,” it added. Still, a limited recovery is expected for the rest of the year with rising unemployment and short-time working reducing consumer spending.

SECO forecast a moderate recovery in 2021, with the underlying economy growing by 5.3% in 2021. This assumed no new round of health restrictions were needed and the scope of additional job losses and company bankruptcies was limited.

Reporting by John Revill, editing by Silke Koltrowitz / REUTERS