Following the easing of pandemic measures at the beginning of March, the domestic economy recovered as expected from the setbacks of the winter half-year. Economic activity is likely to have exceeded pre-crisis levels during the summer. Globally, however, the recovery is likely to be somewhat less vigorous short term. Capacity bottlenecks are currently limiting the growth of global industrial production, which leads to price increases, and the services sector is hampered by stricter coronavirus measures in some countries.

The expert group therefore expects the recovery to continue in Switzerland as well, albeit somewhat less dynamically in the short term. In particular, highly exposed sectors such as international tourism are likely to emerge from the crisis more hesitantly. However, provided that severely restrictive measures such as business lockdowns are not imposed in the coming months, the economic recovery should continue uninterrupted.

Driven in particular by catch-up effects in consumer spending and investment, and also by considerable growth in exports, the Swiss economy is set to grow significantly faster than the historical average in the coming quarters. The expert group forecasts overall growth of 3.2 % in GDP adjusted for sporting events for 2021. The downward revision compared with the June forecast (+3.6 %) is also due to the fact that, according to the latest data, the economic slump in 2020 was not quite as severe, meaning the catch-up potential is also lower overall.

The global economy is set to gain momentum over the coming year. Shortages of primary products and transport capacity should ease, and the pandemic situation should continue to normalise. This will broaden the scope of the economic recovery and positively impact international trade in services, such as tourism. As a result, both domestic demand and foreign trade will receive a boost, leading to greater growth. The expert group forecasts overall GDP growth adjusted for sporting events of 3.4 % in 2022 (June forecast: +3.3 %).

The ongoing recovery is having a clear impact on the labour market. Short-time working can now gradually be reduced, and unemployment is expected to fall sharply. The experts fore-cast an annual average unemployment rate of 3.0 % for 2021, with a further decline to an annual average of 2.7 % in 2022. They predict that inflation will be slightly higher than assumed in the June forecast (2021: +0.5 %, 2022: +0.8 %).

Economic risks
The risk of setbacks as the pandemic progresses cannot be ruled out. Severely restrictive health policy measures would greatly hinder the recovery; these might be imposed if for example new virus variants were to spread coupled with greatly reduced vaccine-effectiveness.

The economic recovery can also be expected to slow if the capacity bottlenecks currently observed persist and the recent increases in inflation translate into sustained price pressures with rising long-term interest rates. In such a scenario, existing risks related to sovereign and corporate debt as well as financial market corrections would be significantly exacerbated, as would risks in the domestic real estate sector.

Conversely, the recovery in Switzerland and in other advanced economies may be stronger than assumed in the expert group's forecast. Having had limited spending opportunities since spring 2020, some households have built up considerable savings, and these may now be released to some degree in the form of consumer spending.

* Further information on the forecast by the federal government’s expert group on economic forecasts can be found in the Konjunkturprognose chapter of the enclosed Konjunkturtendenzen Herbst 2021 and at https://www.seco.admin.ch/economic-forecasts.

Economic forecast: Recovery continues but temporarily loses some momentum