Economic recovery: Swiss GDP is growing strongly

Economic recovery under way – but not in every sector

Switzerland's GDP has now returned to its pre-crisis level and the economic crisis seems to be over. Even so, the COVID-19 pandemic and its consequences are likely to occupy certain sectors for some time to come – and put a spanner in the works of the economic recovery. 

Swiss GDP growing strongly thanks to easing of COVID-19 measures

Switzerland's gross domestic product (GDP) grew 1.8% in Q2 2021 compared with the previous three-month period. The expansion is down to a widespread easing of the COVID-19 mitigating measures introduced during the lockdown in the first quarter of 2021. At the same time, strong worldwide demand for goods is fueling an additional upswing.

A comparison with other countries shows that Switzerland has clearly weathered the crisis well. Only in the US, where the government provided a massive stimulus to economic growth, and in Sweden, where COVID-19 measures were less strict, was economic output in Q2 2021 higher than its pre-crisis level.

Swiss GDP: Switzerland handling economic crisis well

Switzerland handling economic crisis relatively well 

Real GDP, seasonally adjusted, Q4 2019 = 100

Source: Credit Suisse
Last data point: Q2 2021

Some industries are lagging behind in the recovery process

Swiss GDP has actually exceeded its pre-crisis level in recent weeks, according to the weekly economic indicator from the State Secretariat for Economic Affairs (SECO). Even so, the loss of wealth caused by the pandemic is likely to be substantial. Indeed the experts at Credit Suisse estimate Switzerland's pandemic-related GDP shortfall at approximately CHF 57 billion – equivalent to 8% of the country's total GDP in 2019.

In addition, the economy is recovering on an uneven basis from sector to sector. While sectors such as industry, the auto trade, as well as insurance and financial services, have actually surpassed their pre-crisis levels, others – including tourism and transportation – remain well below.

Economy recovering on uneven basis

Swiss economy recovering on uneven basis 

Deviation in value creation versus Q4 2019 level, in %

Source: State Secretariat for Economic Affairs (SECO), Credit Suisse
Last data point: Q2 2021

Sector differences will curb economic recovery

The economic recovery is nevertheless likely to continue over the coming months. Fact is, the Purchasing Managers Index (PMI) for Swiss industry – which is compiled by Credit Suisse in cooperation with procure.ch – remains close to record levels. The equivalent figure for the service sector is likewise well into growth territory. Until such time as the pandemic is fully under control, an across-the-board recovery is nevertheless unlikely.

First, ongoing restrictions will continue to have some effect on areas such as intercontinental tourism, hotels and restaurants, and leisure. Second, widespread supply disruptions in industry are resulting in longer delivery times and rising purchase prices. These delays mean the strong demand for goods is likely to persist for longer than initially forecast, but could then fall sharply as a result of future saturation. The latter is already the case in the market for consumer durables.

Economic recovery: Market for consumer durables is saturated

Sales of consumer durables are flattening off 

Retail sales, index January 2020 = 100

Source: GfK, Credit Suisse
Last data point: July 2021

Economic recovery likely to spread to all sectors by mid-2022

For mid-2022, the Credit Suisse experts expect a significant slowdown in industrial momentum coupled with greater supply; this should alleviate the situation regarding delivery times and prices. By then, the recovery is also likely to have spread to those sectors still facing restrictions. While Swiss GDP is likely to expand by a total of 3.5% in 2021, the pace of growth will probably slow to 2.5% next year.