Coronavirus: Possible consequences for the Swiss economy
The spread of the coronavirus in Europe is likely to quickly lead to negative effects in the Swiss economy as well as in private consumption. Due to supply disruptions and demand shortfalls, it is also likely to have a negative impact on exports and investment.
Since the publication of the media release of February 2020 (See below for summary) the assessment of the KOF economic research institute regarding the effects of the corona virus on the Chinese economy, the global economy and the Swiss economy has changed.. The KOF assumes stronger negative effects.
- The Corona Crisis is linked to the outbreak in northern Italy at the end of February. arrived in Europe. The spread of the virus in Europe is expected to rapidly lead to negative effects on private consumption and due to supply disruptions and demand shortfalls also have a negative impact on exports and investment. Conversely increased government spending This will have a positive impact on overall economic production in the short term. In addition, certain sectors are currently working more, such as healthcare, security and retail.
- Even the infection of a few people in a city is currently enough to cause large sections of the population to Avoid events, restaurants or public transport and refrain from major expenditure. Also the Travel of businessmen and private persons decrease.
- For the Impact on Swiss tourism - due to the fact that fewer guests are arriving from Asia, for example - there have so far only been Circumstantial and hardly any concrete figures. It can be observed, for example, that fewer tourists are travelling in Lucerne. It is not yet possible to calculate the aggregate effects on Switzerland. The same applies to the ban on events with more than 1000 visitors.
- At the beginning of February, the KOF was still Dampening of the annual growth rate of Swiss gross domestic product (GDP) by less than 0.1 percentage points out. This assessment is so unstoppable. At the time, it looked as if the Chinese economy in particular would be hit hard by the virus and the Swiss economy only marginally affected. This assumption is unlikely to prove true. KOF is currently working on economic scenarios for the effects of the Corona crisis on the Swiss and global economy.
- For Europe In its baseline scenario, the KOF assumes that the do not assume a recessionThis means two quarters of negative GDP growth in a row. However, there should be negative impact on private consumption which accounts for about 50 percent of economic output. The corporate world is also likely to see certain Bottlenecks in the supply chains and to Production downturns come when employees cannot show up for work.
- According to Ebbing of the viral crisis is of a clear Rebound can be assumed. As soon as the number of people affected by the virus drops significantly and public life picks up again, consumer spending that was initially postponed, such as car purchases, will be made again. Production disruptions can then also be eliminated from the supply side.
The outbreak of the coronavirus is likely to have a strong negative impact on the Chinese economy, at least in the short term. KOF expects Chinese GDP growth to slow by 0.5 percentage points to 5.5% this year - provided the epidemic is brought under control within a few months. The current epidemic is also expected to have a greater impact on the Chinese and global economy than the SARS epidemic in 2003. On the one hand, the current virus is spreading much faster, and on the other hand, the Chinese government has reacted more quickly and drastically with quarantines and transport restrictions. In addition, China now plays a much greater role in international value chains.
Around 8% of economically relevant Swiss goods exports go to China (incl. Hong Kong). As measures have been taken in various countries to prevent the transmission of coronaviruses by ship crews coming from Chinese ports, transport times are likely to be temporarily extended. It can also be assumed that holiday travel to and from China will come to a standstill in the meantime.
Tourism and watch industry affected
The People's Republic is now the fourth most important source destination for foreign tourists in Switzerland, with a share of foreign overnight stays of just over 7%. However, the importance of Chinese tourists varies greatly from region to region. On average, Chinese guests account for around 4% of total overnight stays in Switzerland, while in the Lucerne/Lake Lucerne tourist region the figure is more than 10% and in the Bern region around 7.5%. Some hotels around Lake Lucerne and in the Bernese Oberland will accordingly be noticeably affected by the absence of tourists from China, while the impact in the rest of Switzerland will be smaller.
In the other service sectors as well as in industry, the impact of the epidemic is expected to be minor. The watch industry is likely to be hit hardest, as Chinese consumers are likely to spend less on luxury products in the current situation. For the pharmaceutical industry, on the other hand, exports and value added are likely to be higher. Overall, the annual growth rate of Swiss GDP will be dampened by significantly less than 0.1 percentage points in the scenario assumed here.
The detailed assessment from February 11, 2020 can be found at here.
