The economy is set to contract by 4.7% in 2020 and is projected to rebound by 2.2% in 2021 and 3.4% in 2022. Activity will only reach its pre-crisis level in 2022. Private investment and consumption will be held back by low confidence and high unemployment. Exports will be hindered by subdued growth in partner countries. A strong second wave of infections heightens uncertainty, but a widespread implementation of an effective vaccine in the latter part of 2021 should improve the sanitary situation.
Budgetary support has been substantial, and monetary policy remains accommodative. Further fiscal support may be needed. As the use of the short-time work scheme decreases, many workers may need training and reskilling to match labour demand over the medium term. The procedures to start a business should be streamlined to enable better and faster reallocation of workers and capital.
Switzerland’s living standards remain high. Its population is healthier than in many countries and is well educated. This contributes to high employment rates and narrow wage differentials. As a small open economy, Switzerland has benefited from the flow of ideas, people and capital. It boasts world-class industries and attracts international talent. Zurich and Geneva routinely rank among the world’s most liveable cities. The challenge is therefore to sustain these achievements.