Swiss economy slumped at start of year as virus hit consumption

[ZURICH] The Swiss economy shrank at the start of the year as coronavirus restrictions such as shop closures hampered activity.

Gross domestic product contracted 0.5 per cent in the first quarter, the State Secretariat for Economic Affairs said. Economists in a Bloomberg survey had forecast a reading of minus 0.4 per cent. Growth in the final quarter of 2020 was revised down to 0.1 per cent, showing that the nation only narrowly missed a double-dip recession.

"Value added dropped significantly in the service sector following the tightening of measures designed to contain the coronavirus pandemic. Private consumption also contracted sharply," SECO said. "By contrast, industry grew markedly and prevented a greater decline in GDP."

Switzerland - like the neighboring euro zone, which did slide into a double-dip recession - had a slow start to vaccinations that left the economy exposed to resurgent infections as the year began.

The signs are that the nation is now on the path to recovery with inoculations increasing. It allowed restaurants to resume serving guests indoors as of this week, and cinemas and theaters can host bigger crowds.

In the meantime, furlough programs have kept a lid on joblessness, while foreign trade, including exports of pharmaceuticals products, has helped support the economy.

Last month's KOF economic barometer deemed the outlook to be "very positive," and Swiss National Bank President Thomas Jordan said in an interview he was cautiously optimistic.

BLOOMBERG