Switzerland GDP (Q4 2020) & KOF Barometer (Feb.) - Capital Economics
Nordic & Swiss Economics

Switzerland GDP (Q4 2020) & KOF Barometer (Feb.)

Nordic & Swiss Data Response
Written by Melanie Debono

The 0.3% q/q expansion in Swiss GDP in Q4 was slightly better than expected and means that output was just 1.6% smaller than in Q4 2019. Tighter virus-related restrictions and a renewed slump in the neighbouring euro-zone means that activity is likely to remain weak in Q1. But as elsewhere, the economy is clearly holding up much better than during the first lockdown.

Activity proving resilient to lockdown

  • The 0.3% q/q expansion in Swiss GDP in Q4 was slightly better than expected and means that output was just 1.6% smaller than in Q4 2019. (See Chart 1.) Tighter virus-related restrictions and a renewed slump in the neighbouring euro-zone means that activity is likely to remain weak in Q1. But as elsewhere, the economy is clearly holding up much better than during the first lockdown.
  • SECO made some revisions to previous quarters’ data. The contractions in Q1 and Q2 were bigger than previously thought, but the bounce-back in Q3 was revised up. Coupled with the expansion in Q4, this means that the economy contracted by 2.9% in 2020, more than during the global financial crisis (-2.1%) but still less than in Germany (-5.3%) and broadly on par with the Scandinavian economies.
  • The expenditure breakdown showed that domestic demand contracted a touch, with increases in government consumption and investment not being enough to offset a drop in household spending. (See Table 1.) But abstracting for volatility caused by merchanting, net trade boosted growth.
  • As expected, the services sector was dealt a heavy blow by virus containment measures. Indeed, accommodation and food output contracted by nearly 21% q/q. Although this did not offset Q3’s 114% expansion, it was the biggest fall in any sector. Meanwhile, as indicated by timely industrial production data and the manufacturing PMI, manufacturing held up well last quarter (it expanded by 0.3% q/q).
  • The tightening of restrictions at the end of last year means that the services sector will have started 2021 on the back foot. But the stronger-than-expected increase in the KOF Economic Barometer in February (also released this morning), from 96.5 in January to 102.7, shows that the economy has been more resilient than last year, and may even manage to grow this quarter. (See Chart 2.) More generally, while the vaccine rollout has been frustratingly slow, GDP growth should pick up in Q2 as restrictions are eased and we expect Switzerland to recover its pre-crisis level sooner than in the euro-zone as a whole.

Chart 1: Q4 2020 GDP (% y/y)

Chart 2: GDP & KOF Economic Barometer

Sources: Refinitiv, Capital Economics

Sources: Refinitiv, Capital Economics

Table 1: Switzerland GDP

GDP

H’hold Cons.

Gov’t Cons.

Investment

Exports (Exc. Gold & Val.)

Imports (Exc. Gold & Val.)

% q/q

% y/y

% q/q

% q/q

% q/q

% q/q

% q/q

Q1 2020

-1.9

-0.4

-4.1

0.9

-3.5

-3.1

-0.3

Q2 2020

-7.2

-8.0

-8.1

0.9

-6.9

-9.1

-16.9

Q3 2020

7.6

-1.4

12.2

-0.1

7.9

5.0

10.0

Q4 2020

0.3

-1.6

-1.5

2.3

1.2

-0.6

-0.6

Source: Refinitiv


Melanie Debono, Europe Economist, melanie.debono@capitaleconomics.com