The Dutch and Swiss economies are set for an unprecedented decline this year, as efforts to contain the coronavirus outbreak brought large parts of the two countries to a virtual standstill in recent months.
The Dutch economy, the euro zone’s fifth largest economy is set to shrink by 6.4% this year, before rebounding with growth of 3.3% in 2021, government policy adviser CPB said on Tuesday.
The CPB said its projections were very uncertain, as it is still unclear how the COVID-19 pandemic would evolve and exactly how much damage economic lockdowns caused in the first half of 2020.
A new spike in infections in coming months could lead to another year of recession in 2021, the government’s economic policy adviser said, while unemployment would jump to more than 10%.
In its base scenario, which assumes a slow recovery to start in the second half of 2020, unemployment is already set to increase to 7% by the end of next year, which would be a doubling from its 2019 level.
To stimulate the recovery, the government should consider speeding up investment plans for the energy transition and home building, the CPB said, even though economic support measures are already set to lead to an 8% government deficit this year.
Switzerland’s economy will also suffer its worst downturn in decades during 2020 as the coronavirus pandemic damages output and jobs, the government said on Tuesday, but the downturn will be less severe than initially feared.
Swiss gross domestic product will fall 6.2% this year, the State Secretariat for Economic Affairs (SECO) said, the worst downturn since 1975, when the country was hit by the aftermath of the oil price shocks.
Unemployment is forecast to rise to 3.8% this year, as foreign trade suffers, consumer spending shrinks and companies emerge slowly from shutdowns imposed to halt the spread of the COVID-19 virus.
Still, the forecast was a slight improvement from the 6.7% downturn in GDP foreseen by the Swiss government’s economists in their April statement, and compares favourably with other European countries.
The Organisation for Economic Co-operation and (OECD) says Britain could suffer an 11.5% slump this year. Downturns of 11.4% are expected in France and 11.3% in Italy.
The Swiss government expects a gradual recovery during the second half of 2020, provided a massive second wave of the disease along with severe restrictions does not occur.
In 2021, SECO forecasts underlying economic growth of 4.9%, although unemployment will remain high by Swiss standards at 4.1%.
“Switzerland’s economy has been fairly resilient in an international comparison,” said Gero Jung, chief economist at Mirabaud bank.
“Switzerland has been very quick to respond to the crisis, with the government’s stimulus package being massive, totaling more than 60 billion francs ($63.22 billion) or close to 10% of domestic GDP,” he said.
More than 15 billion Swiss francs in emergency loans have also been handed out to nearly 130,000 business. Some 1.9 million people – or 37% of the workforce – have applied for short-time working compensation.
The Swiss lockdown to prevent the disease’s spread was also less severe than in other countries, while the country’s large pharmaceuticals sector has continued to thrive.
REUTERS