The Swiss economy grew by a solid 0.3 percent in the final quarter of last year. It achieved growth of 0.9 percent for the full year 2019. It is difficult to make forecasts for the current year due to the speed of developments concerning the coronavirus outbreak. A major slump nevertheless seems almost unavoidable. Global weakness is now putting severe pressure on the Swiss economy. Far-reaching measures to curb the virus within Switzerland have now also brought parts of the domestic economy to a standstill. Supply chains have also been broken, consumers are anxious and tourists are staying away. While the Swiss National Bank (SNB) is primarily focusing on currency market interventions, the Federal Council has promised the economy support worth 10 billion Swiss francs so far.

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Although the US growth rate in 2019 (2.3 percent) failed to hit the Trump administration’s target of 3 percent, the US economy remained robust up until recently. Thanks to its large domestic market, US industry is relatively immune to a slump in global demand compared to many other countries. However, the concern is that the coronavirus outbreak will also have a huge impact on the US. The measures already taken will significantly restrict the domestic market. Greater anxiety amongst consumers is also anticipated. The US central bank has already cut its key rate to 0.00–0.25 percent at two extraordinary meetings to boost growth. It has also carried out bond purchases totalling 700 billion US dollars and undertaken massive interventions on the money market to ease the tight liquidity situation.

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Europe has become the epicentre of the coronavirus crisis in recent days. Here the virus is having an adverse impact on economies that were previously only achieving low growth rates. Of all places Italy, which was among the eurozone’s poorest performers in the last quarter with quarterly growth of –0.3 percent, is now being severely hit by the crisis. Two quarters of negative growth are almost inevitable here. Major economic restrictions are also being adopted in many other countries to stem the spread of the virus. Unlike in the USA, the European Central Bank (ECB) has not cut its key rate yet. As the ECB has pursued an extremely expansive policy in recent years, there is now little room to reduce interest rates further. Christine Lagarde, President of the ECB, indicated that she primarily hopes to see significant support from fiscal policy.

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A month ago it seemed as though coronavirus would primarily have major economic consequences for China and its neighbouring countries. But while the number of cases is rising around the world, the countries in East Asia have stabilized and even reduced the number of new infections. This means there is a good chance that these countries will return to normality more quickly than other regions. However, the consequent weak demand from Europe and other parts of the world could hold back a return to normal. The measures introduced have also had a huge impact in Asia. The first figures for January and February indicate that there has been a huge downturn in China in both the retail sector and industrial production. China is now set to post the first negative quarterly growth since Mao Zedong’s cultural revolution.

Growth, sentiment and trend

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