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Swiss Economy Returns to Growth as Service Sector Recovers

Swiss Economy Returns to Growth as Service Sector Recovers

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The Swiss economy rebounded from its pandemic-induced slump in the second quarter, as a relaxation of social distancing restrictions allowed the service sector to ramp up operations. 

Gross domestic product increased 1.8%, just short of the 1.9% forecast in a Bloomberg survey of economists. Hotels, restaurants and leisure all registered a strong rise in activity.  

The Swiss economy has bounced back more quickly than even neighboring Germany. The much-feared wave of spiraling unemployment and business insolvencies hasn’t materialized, thanks in part to fiscal support.

Swiss Economy Returns to Growth as Service Sector Recovers

The central bank has also had a hand in stabilizing the economy, pursuing an ultra-expansive policy of negative interest rates plus occasional foreign exchange interventions to prevent a fall in consumer prices. 

Earlier this week, Swiss National Bank Vice President Fritz Zurbruegg affirmed the necessity of the policy, saying that without it, the currency would rise. 

But forward-looking indicators point to growth decelerating as supply-chain issues disrupt the export-reliant economy and the government struggles to boost the vaccination rate, despite a fourth Covid-19 wave. 

Swiss Economy Returns to Growth as Service Sector Recovers

While an above-average reading of the KOF economic barometer suggests the growth rate will only cool after its rapid acceleration earlier this year, a sentiment index by Credit Suisse Group AG plunged sharply, implying an abrupt halt.  

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