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Swiss economists insist country must reopen more rapidly

Although several sectors have resumed their activities on April 27th, some experts say that the process of getting back to ‘normal’ should be sped up in order to save the economy.

Published: 27 April 2020 17:02 CEST

Swiss economists insist country must reopen more rapidly

Swiss economy must be revived, experts say. Photo by Fabrice Coffrini, AFP

While certain medical, health, wellness, and beauty services, along with garden centres, flower shops and hardware stores, have already re-opened in Switzerland, many other businesses will resume only on May 11th and June 8th.

“The gradual and controlled opening of the economy must be accelerated,” said Heinz Karrer, president of economiesuisse, the umbrella organisation of the Swiss economy.

For instance, although the Federal Council is working to re-open other sectors crucial to the Swiss economy, including tourism and gastronomy, “it was imperative to reopen the entire retail business” at one time, on April 27th.

“The companies are ready. They know how to comply with protective measures”, he added.

Karrer said the concerns of the Federal Council regarding a second wave of Covid-19 infections are “understandable”.

“We don't want that either. But to prevent it, we must constantly respect protective measures and not freeze the activities of a large part of the economy any longer ”, he noted.

READ MORE: Swiss government criticised for not doing enough to revive economy

He pointed out that faster re-opening of the economy is needed because Switzerland is heading “into the worst recession in 90 years. There will be a wave of bankruptcies, unemployment will quickly increase to 4 or 5 percent and job security will fall”.

Others too are critical of the three-phased approach that the government has taken to end the lockdown and revive the economy.

“Instead of strengthening the testing system, getting enough protective masks and continuing traceability of infections through applications, which would allow people in Switzerland to return to work as quickly as possible, the government increases the damage to the economy “, the Swiss People’s Party said.

However, in order to avoid further damage to the economy, the Federal Council will decide in the coming days on how restaurants and tourist facilities can gradually re-open before the summer holidays.

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How is Denmark's economy handling inflation and rate rises?

The council, led by four university economics professors commonly referred to as “the wise men” or vismænd in Denmark, gave a much rosier picture of Denmark’s economy in its spring report, published on Tuesday, than it did in its autumn report last year.

“We, like many others, are surprised by how employment continues to rise despite inflation and higher interest rates,” the chair or ‘chief wise man’, Carl-Johan Dalgaard, said in a press release.

“A significant drop in energy prices and a very positive development in exports mean that things have gone better than feared, and as it looks now, the slowdown will therefore be more subdued than we estimated in the autumn.”

In the English summary of its report, the council noted that in the autumn, market expectations were that energy prices would remain at a high level, with “a real concern for energy supply shortages in the winter of 2022/23”.

That the slowdown has been more subdued, it continued was largely due to a significant drop in energy prices compared to the levels seen in late summer 2022, and compared to the market expectations for 2023.

The council now expects Denmark’s GDP growth to slow to 1 percent in 2023 rather than for the economy to shrink by 0.2 percent, as it predicted in the autumn.

In 2024, it expects the growth rate to remain the same as in 2003, with another year of 1 percent GDP growth. In its autumn report it expected weaker growth of 0.6 percent in 2024.

What is the outlook for employment?

In the autumn, the expert group estimated that employment in Denmark would decrease by 100,000 people towards the end of the 2023, with employment in 2024 about 1 percent below the estimated structural level.

Now, instead, it expects employment will fall by just 50,000 people by 2025.

What does the expert group’s outlook mean for interest rates and government spending?

Denmark’s finance minister Nikolai Wammen came in for some gentle criticism, with the experts judging that “the 2023 Finance Act, which was adopted in May, should have been tighter”. The current government’s fiscal policy, it concludes “has not contributed to countering domestic inflationary pressures”.

The experts expect inflation to stay above 2 percent in 2023 and 2024 and not to fall below 2 percent until 2025.

If the government decides to follow the council’s advice, the budget in 2024 will have to be at least as tight, if not tighter than that of 2023.

“Fiscal policy in 2024 should not contribute to increasing demand pressure, rather the opposite,” they write.

The council also questioned the evidence justifying abolishing the Great Prayer Day holiday, which Denmark’s government has claimed will permanently increase the labour supply by 8,500 full time workers.

“The council assumes that the abolition of Great Prayer Day will have a short-term positive effect on the labour supply, while there is no evidence of a long-term effect.”

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