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Swiss gov't lowers 2021 economic forecast on global pressures

·2-min read
Outbreak of the coronavirus disease (COVID-19), in Lausanne

By Brenna Hughes Neghaiwi

ZURICH (Reuters) - Switzerland's economy is expected to grow by 3.2% this year, the government said on Thursday, lowering its full year outlook as a less sunny global picture limited Switzerland's recovery.

"The economic recovery is set to continue as expected, though growth is initially less dynamic than forecast previously," the State Secretariat for Economic Affairs (SECO) said in a statement.

A less vigorous global recovery, marked by capacity bottlenecks limiting the growth of global industrial production and tightened coronavirus measures hampering the services sector in some countries, meant Switzerland's economy was expected to grow less this year than the 3.6% growth it forecast in June, the government expert group said.

"The downward revision...is also due to the fact that, according to the latest data, the economic slump in 2020 was not quite as severe, meaning the catch-up potential is also lower overall."

The Swiss economy returned to growth in the second quarter, albeit not quite as strongly as economists had forecast, as easing COVID-19 restrictions helped reverse two straight quarters of contraction.

SECO on Thursday said economic activity is likely to have exceeded pre-crisis levels during the summer.

Inflation has also picked up, but central bank officials have warned the coronavirus crisis continues to pose uncertainties and increases could be temporary.

Switzerland on Monday imposed new pandemic-related restrictions, requiring people to show a COVID-status certificate to enter bars, restaurants and other indoor spaces and at events, in a move to relieve pressure on hospitals that are struggling to cope with a fourth wave of infections.

The government is also mulling new travel restrictions for people who had not been vaccinated or recovered from the virus.

"Highly exposed sectors such as international tourism are likely to emerge from the crisis more hesitantly," SECO said. "However, provided that severely restrictive measures such as business lockdowns are not imposed in the coming months, the economic recovery should continue uninterrupted."

The upturn is expected to pick up next year, with the Swiss economy anticipated to grow at a rate of 3.4% in 2022, the government said, higher than its previous forecast of 3.3%.

(Reporting by Brenna Hughes Neghaiwi; Editing by Riham Alkousaa and Emelia Sithole-Matarise)

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