Switzerland: GDP records largest drop on record in Q2
August 27, 2020
GDP fell at a quicker pace in the second quarter, contracting a record 8.2% on a seasonally-adjusted quarter-on-quarter basis (Q1: -2.5% s.a. qoq).
On the domestic side, the downturn reflected contractions in private consumption and fixed investment. Household spending shrank at a quicker rate of 8.6% seasonally-adjusted quarter-on-quarter in Q2, down from the 4.7% contraction in Q1 and driven by the closure of shops and restaurants. Fixed investment declined at a more pronounced rate of 8.8% in Q2, down from the 2.8% contraction in the prior quarter, due to lower investment in equipment. Public consumption, however, rose 0.2% (Q1: +0.8% s.a. qoq).
Exports of goods and services slid at a steeper rate of 5.7% in Q2 (Q1: -4.1% s.a. qoq). In addition, imports of goods and services dropped at a sharper pace of 5.6% in Q2 (Q1: -1.3% s.a. qoq) following depressed domestic demand.
On an annual basis, economic activity fell 9.3% in Q2, down from the previous period's 0.7% contraction.
Looking ahead, the economy is forecast to make up some lost ground in the second half of the year on stronger domestic and external demand. However, an expected rise in the unemployment rate will temper the rebound, while possible restrictions to tame a second wave of Covid-19 pose a downside risk.
Author: Oliver Reynolds, Economist