While growth in 1.7% was mentioned in January this year, Vaudois GDP is now expected to drop 5.5%.
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The Vaud economy is not immune to the consequences of the coronavirus pandemic. While there was talk of growth of 1.7% in January this year, Vaudois gross domestic product (GDP) is now expected to drop 5.5%, according to the latest CREA forecasts published by the BCV, the State of Vaud and the CVCI. The canton’s economy could recover partly from this severe recession next year, with growth of 3.5%. Currently, the forecast should be viewed with caution due to the large number of unknowns, including the development of the pandemic in the coming months.
The Covid-19 pandemic has caused a global crisis that will translate into a global recession this year, by 3.0% according to April forecasts from the International Monetary Fund (IMF). No industrialized country will escape a contraction in its GDP; only some emerging economies could show positive, but slower, growth. According to the IMF, this recession, likely the worst since the Great Depression of the 1930s, could be followed by a recovery next year. But returning to the level before the pandemic will be long and the risk of a worsening of the crisis is very present, for example if the containment measures were to be prolonged.
Switzerland and the canton are no exception to this crisis. Because they themselves are affected by the epidemic and apply measures – eased in recent weeks – that slow its spread, but severely dampen the economy. But also because they are strongly oriented towards foreign sales, while world trade was considerably disrupted: thus, Vaudois exports fell by 13.5% in the first quarter. The Confederation, the cantons, including that of Vaud, and certain private actors have taken extraordinary measures to mitigate the shock suffered by companies as well as by their employees: compensation for reduction of working hours, emergency credits or arrangements for rents or credits.
Despite this, the shock was severe. In April, almost 150,000 people were registered as part-time unemployed in the canton, while the number of unemployed increased there by 44.7% in annual rate. At the Swiss level, the consumer climate has dropped to its historic low. With the exception of chemistry and pharmaceuticals, all branches are in the red and are contributing to the 5.5% drop in GDP expected in 2020. The current scenario is that of a slow recovery in the second half, however slowed down by the measures of precaution in place to curb the spread of the virus and by retaining consumers due to the deterioration of the job market.
The continuation of this slow recovery should result in 2021 in a return to growth and an increase in Vaudois GDP of 3.5%, to which most branches should contribute. Compared to Switzerland as a whole, the canton could thus be more resilient: nationally, the fall in GDP is thus expected this year at 6.7% by the State Secretariat for Economic Affairs; despite a stronger rebound next year (5.2%), Switzerland would also take longer than the canton to return to its pre-crisis level.
However, these forecasts should be viewed with caution, as the level of uncertainty is high. The Covid-19 pandemic has brought to the fore the previously prevalent factors of uncertainty, such as tensions between China and the United States, the United Kingdom’s exit from the European Union (EU), a possible appreciation of the franc as a safe haven or some uncertainty in the development of Switzerland’s relations with the EU. However, the development of the epidemic – and that of the necessary precautionary measures – is, at this stage, difficult to anticipate. In addition, this uncertainty does not only concern Switzerland, but also its main trading partners.
Four publications per year
GDP is an essential indicator for assessing the dynamism of an economy. The Vaudois GDP has been published since 2009. To guarantee a rigorous and transparent calculation, the BCV, the State of Vaud, represented by the Service for the Promotion of the Economy and Innovation and Statistics Vaud, as well as the CVCI have mandated the CREA Institute for Applied Economics at the Faculty of Business and Economics at the University of Lausanne. The CREA methodology notably includes the cantonal GDP estimates from the Federal Statistical Office. Since January 2019, the data have been corrected for the effects of major international sporting events, introduced in the national accounts in 2017.
Since 2011, Vaudois GDP has been published four times a year (next publication: September 2020). Private sector and political decision-makers therefore have up-to-date data and forecasts at all times, so that they can better prepare their decisions and steer their projects.
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