The Swiss economy is recovering rapidly as the pandemic subsides. Although Credit Suisse economists continue to expect economic growth of 3.5%, they anticipate that the upturn will lose some of its momentum. Accordingly, the bank's economists are forecasting that GDP growth will slow to 2.0% in 2022. The hospitality industry is one of the sectors that has been hardest hit by the COVID-19 crisis, with some segments expected to face challenges for the foreseeable future.

A recovery is now underway as more areas of the economy reopen – a process accelerated by pent up consumer spending. The majority of private consumption is therefore likely to return to normal levels between now and the start of fall 2021. Meanwhile, the recovery boom in the Swiss industrial sector continues. Gross domestic product is likely to grow by 3.5% overall this year, more than offsetting the decline seen in 2020 (-2.6%). For 2022, Credit Suisse economists expect this growth momentum to slow to 2.0%. The catch-up effects are likely to diminish over time, particularly since estimates suggest about 30% of savings from the two lockdowns will not be spent and will, instead, be set aside for a "rainy day". As people's ability to access services increases, the demand for goods is likely to soften. The relatively sluggish expansion of the workforce indicates a certain skepticism on the part of the corporate sector about how long the recovery boom will last.

Restaurants on gradual road to recovery; tourism continues to suffer
The positive overall trend also obscures the troubled situation in various sectors – most notably the hospitality industry. The restaurant and tourism sectors saw revenues plunge by 40% and 67%, respectively, during the pandemic year of 2020. This slump was even more pronounced in the urban regions around Lake Geneva and in Zurich, which were impacted by the absence of foreign tourists as well as a shortfall in income from the going-out industry. Only a few segments were able to benefit from the crisis: These included non-hotel accommodation – as the Swiss opted for "staycations" in small groups – as well as takeaways, given that restaurants and bars were either closed or operating on a limited basis only. There was no evidence of any decline in the number of company startups in the hospitality sector in 2020; indeed the startup rate actually increased in 2021. A wave of bankruptcies was averted at the same time, partly due to government support measures.

An end to the lean period is in sight for the restaurant trade. Nevertheless, restrictions on the number of guests and the closure of clubs, discotheques, and dance venues will continue to hinder a full recovery in revenues for the time being. However, in terms of the further development of tourism, Credit Suisse economists have produced four different scenarios for future trends in tourism flows with a time horizon of around six months (see page 16 onwards of the study). In summary, they conclude that a rapid return to the pre-crisis situation is fairly unlikely. That's why the non-hotel accommodation sector as well as Swiss vacation regions will once again in all probability be among the winners in summer 2021.

SNB to stick to expansionary policy for now
The Swiss National Bank (SNB) has taken a small step toward "normalization". According to estimates by Credit Suisse economists, the SNB is likely to have sold foreign currency reserves on a small scale in recent months. The aim is not to strengthen the Swiss franc but rather to "test" the market. Foreign exchange purchases remain likely in the view of the economists, if the upward pressure on the Swiss franc increases again. They do not expect the Swiss National Bank to increase its key rate at any point during the forecast period – i.e. not until the end of 2022 at the earliest.

"Monitor Switzerland" is published quarterly and is available online in English, German and French at: www.credit-suisse.com/monitorswitzerland

The next issue will be published on September 14, 2021.