(Bloomberg) --
The Swiss economy is expected to suffer its biggest contraction since the mid-1970s this year and recover only slowly in 2021, the government revealed in a bleak new outlook.
The State Secretariat for Economic Affairs in Bern slashed its forecast on Thursday, saying the economy was expected to shrink 6.7% in 2020, faring worse than it did during the financial crisis. That's because in addition to the downturn globally, private consumption in Switzerland would face headwinds from rising unemployment and people's uncertainty about the future.
“The risk of defaults on loans and insolvencies of companies is increasing, which could threaten the stability of the financial system,” the SECO said. “In addition, there is a significantly greater risk of upheaval on the financial markets and further upward pressure on the Swiss franc.”
With businesses across much of the industrialized world shuttered to contain the outbreak, the global economy is on course for its worst recession in almost a century, according to the International Monetary Fund.
Although some governments, including Switzerland's, have started to ease quarantine restrictions, the damage inflicted upon small and medium-sized businesses like restaurants or clothing boutiques is becoming increasingly clear.
Read More: Europe Confronts Reality That Many Companies Won't Survive Virus
Assuming the pandemic doesn't intensify again, “the Swiss economy should continue its fragile recovery in 2021,” the SECO said.
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