Swiss government forecasts 2021 deficit but no tax hikes

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Investec
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The coronavirus is set to knock a CHF 1 billion hole in Switzerland’s federal budget for 2021, according to a press release.

Without the virus the budget was CHF 2.2 billion in the black. Post virus the budget is now CHF 1 billion in the red. The virus is expected to add CHF 2.0 billion to next years spending. The extra money is earmarked for SARS-CoV-2 tests, business loan guarantees and support to the sports sector.

The Federal Council is confident that the extra money borrowed to cover Covid-19 expenditure can be paid back without raising taxes.

Switzerland’s federal spending is constrained by a mechanism known as the debt brake. The mechanism allows some flexibility to account for business cycles. The brake allows a temporary deficit of up to CHF 3.3 billion, however, deficits today reduce the scope for deficits in the future.

The government will make a definitive decision on the budget over the summer and decide on future Covid-19 debt repayments at the end of the year.

Alasdair Macleod

About Investec

Investec is a distinctive Specialist Bank and Asset Manager. We provide a diverse range of financial products and services to a niche client base in three principal markets, the United Kingdom, South Africa and Australia, as well as certain other geographies. Investec’s strategic goals are motivated by the desire to develop an efficient and integrated business on an international scale through the active pursuit of clearly established core competencies in the group’s principal business areas.

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