Switzerland GDP Q4 2019


Switzerland: Economic growth moderates slightly in Q4 2019

March 3, 2020

The economy grew 0.3% on a seasonally-adjusted quarter-on-quarter basis in the fourth quarter of last year, a notch down from the 0.4% expansion in the third quarter, but surpassing market expectations of 0.2% growth. In annual terms, GDP expanded 1.6% in Q4, accelerating from 1.1% in Q3 and marking an over one-year high. On the whole, the economy grew 0.9% in 2019, decelerating sharply from 2018’s 2.8% expansion.

A floundering external sector led the deceleration in the fourth quarter. Exports of goods and services declined 3.9% quarter-on-quarter in Q4 (Q3: +4.7% quarter-on-quarter). This was in large part due to cyclically sensitive sectors that have been hard-hit by external headwinds, such as machinery and metals, while exports of chemical and pharmaceutical products moderated in Q4. Meanwhile, imports of goods and services contracted at a much sharper 7.1% pace, easing the drag on growth.

On the other hand, the domestic economy fared well in the fourth quarter. Private consumption gained traction in Q4 (Q4: +0.4% qoq; Q3: +0.2% qoq), supported by a red-hot labor market, higher wages, and rising purchasing power related to a strong franc. Meanwhile, fixed investment also picked up in the quarter (Q4: +1.6% qoq; Q3: +0.2% qoq), boosted by stronger construction investment and investment in equipment and despite declining machinery and electrical equipment investment. Conversely, public spending softened somewhat in the quarter (Q4: +0.5% qoq; Q3: +0.6% qoq).

Turning to this year, although solid momentum appeared to carry over in the first quarter of 2020, with economic indicators such as the KOF barometer pointing to improving dynamics, the recent outbreak of coronavirus has quickly reversed the narrative and skewed risks to the downside. Given the open and trade-reliant characteristics of the Swiss economy, paired with its border with Northern Italy where the virus has spread dramatically in recent weeks, the government is bracing for the country to be hit hard by the epidemic and has already taken measures such as banning large events, while major companies have imposed travel bans.

Commenting on the economic outlook, Charlotte de Montpellier, economist at ING, stated:

“The spread of the coronavirus epidemic and the containment measures taken in China, Europe and Switzerland will harm growth. At this stage, it is extremely difficult to make a forecast, which will depend mainly on the duration of any disruption. Nevertheless, it can be estimated that growth in at least Q1 and Q2 2020 will be affected, probably leading to zero or negative readings in both quarters. As a result, we're expecting growth to be below 1% in 2020 […] despite the positive effect of sporting events.”

In December, the State Secretariat for Economic Affairs forecast the economy to expand 1.7% in 2020 and 1.2% in 2021. New SECO forecasts will be published on 17 March and will likely include a downgrade for 2020. FocusEconomics Consensus Forecast panelists are less optimistic, projecting growth of 1.2% in 2020, which is unchanged from last month’s forecast. In 2021, the panel sees growth at 1.3%.

Author:, Economist

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