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Federal estimates show that, on average, between 20 and 28 percent of economic output failed in April. But the level of dismay varies greatly from branch to branch. For the first time, the costs of the crown crisis can be more accurately quantified.
Postal and courier services, the pharmaceutical sector and the public administration have benefited economically from the blockade.
After eight weeks of partial virus-related closures in the Swiss economy, significant relief is pending. From an economic point of view, this is extremely gratifying, because the costs of “stay home, please everyone!” They are huge Thanks to the first available indicators, their dimensions can now be quantified somewhat more precisely. At the Secretary of State for Economic Affairs (SECO), state business cycle specialists used information and forecasts on short-term scope of work, sales and exports, as well as survey results to estimate the extent to which economic performance in individual sectors was affected in April. Thanks to this estimate, more calculations can now be made. Weighting sectors with their share of gross domestic product in 2017 leads to a total loss of between 20 and 28% of economic output that is expected under normal circumstances.
The performance of aviation and travel agencies, the arts and leisure sector, the hospitality industry and the hotel industry, as well as personal services such as hairdressing, massage and cosmetic salons, was almost completely stifled in closing . Therefore, it was important to help these industries a little. But the added value of industry and commerce, as well as transportation and logistics, was cut in half, and construction and the health system collapsed by 20-30%. On the contrary, postal and courier services, the pharmaceutical sector and, despite everything, the public administration benefited financially from the blockade.
Industry and commerce lost more
Statistics on gross domestic product achieved in 2019 can now roughly estimate the costs of the previous eight weeks of blocking. In total, between CHF 21 billion and CHF 30 billion may have been lost since mid-March.
However, the sectors have a very different weight. Travel agencies, such as hairdressing salons and other personal services, were the most affected, but they only contribute 0.2% and 0.6% to economic production. The industry without chemicals and pharmaceuticals, however, generally contributes 12.4%. Therefore, the greatest losses in value added come from industry, commerce, trade, business-related services such as IT, marketing and trust, as well as healthcare. It will be correspondingly important for the future course of business that they soon recover.
Unfortunately, the virus can hardly be removed in the near future. Society and the economy cannot simply return to the pre-crisis situation. Assuming that existing restrictions can be gradually relaxed, that there will be no second blockade, and that economic activity will recover slowly, Seco expects economic output in 2020 to drop by a good 6% compared to the previous year. Seco’s estimates of production loss by sector evaluated here imply a fall of 4 to 11%, which, according to NZZ estimates, corresponds to CHF 30 to 80 billion.
Are some sectors updating?
Seco hopes that, at best, many sectors will be able to return to normal relatively quickly in the rest of the year, or even recoup some of the losses suffered. Agriculture, health and education, but also banks, insurance companies and even the media would not suffer any loss of added value throughout the year. In the worst case scenario, the loss of these sectors should be limited to 5-10%. Therefore, in hairdressing salons, etc., the loss should only represent about a fifth of the year. El Seco, on the other hand, expects losses of one to two thirds of the added value in travel agencies, aviation and in the arts and entertainment sector.
Behind these data there are numerous job losses and corporate bankruptcies. However, the sectors that make the largest contribution to gross domestic product again are not the most affected. A large part of the costs of CHF 30 to 80 billion for the Corona crisis will come from industry, commerce and construction. And as huge as it sounds, it’s a pretty conservative estimate. Seco assumes that economic activity abroad will normalize accordingly and that there will be no more financial or debt crises afterward. If this is not the case, the threshold of 100 billion Swiss francs could be reached quickly.
