Jordan insists the central bank can continue to defend the Swiss franc. (Keystone / Marcel Bieri)
Coronavirus is costing between CHF11 billion and CHF17 billion a month, putting such a strain on the Swiss economy that it will take years to recover. Swiss National Bank (SNB) chairman Thomas Jordan has predicted the worst depression since the 1930s.
In two newspaper interviews on Sunday, Jordan warned of significant job losses and an erosion of prosperity in the wake of the pandemic. The economy is currently operating at between 70% to 80% of normal levels, he told the SonntagsZeitungexternal link.
“Many people may not yet be able to imagine what these numbers mean for prosperity in Switzerland. But we will have to chew on these costs for years to come,” he said.
The cost of bailing out the economy with taxpayer funding has so far hit CHF57 billion ($59 billion), but the newspaper predicts that the eventual bill could top CHF100 billion. This would rank the Swiss bailout package as among the 20 largest in the world.
Government economists have predicted a slump in economic output of -6.7% this year while the unemployment rate rises.
The global economic downturn has made the safe haven franc even more attractive to investors, heaping pressure on Switzerland’s central bank to stop it from appreciating too fast against other currencies. A strong franc spells even greater misery for Swiss exporters and the domestic tourism industry.
The SNB has imposed negative interest rates and is continuously intervening in the foreign exchange markets to hold back the franc. But some people fear that the CHF800 billion spent on this operation could come back to haunt the central bank.
“Without the [SNB’s] monetary policy, we would see a completely different franc exchange rate in the current situation,” Jordan told the Tribune de Genèveexternal link newspaper. But he was adamant that the central bank still has room to manouevre in the battle against deflation.
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