By John Revill and Brenna Hughes Neghaiwi
ZURICH (Reuters) – Switzerland’s federal budget deficit could jump to around 6% of national output this year, its finance minister said on Wednesday, due to the costs of higher unemployment and a massive aid package for businesses hit by the coronavirus crisis.
Switzerland ran a federal budget surplus of 3.60 billion francs in 2019 but, like other countries around the world, it has been forced to shutter much of the economy over the past few weeks to stem the spread of the disease.
Finance Minister Ueli Maurer said the crisis was costing around 5 billion Swiss francs ($5.14 billion) per week in lost output and tax revenues would also be sharply reduced.
“The unemployment rate will have a massive influence on the budget deficit,” Maurer told a news conference in Bern. “If the unemployment situation gets worse… then the budget deficit could rise to 40 billion francs or more.”
A full assessment will take place in the third quarter but the outlook appears grim, he said.
“At the moment we can simply say that at the end of the year, the situation will look much worse than at the start of the year. How much, we still have to judge,” Maurer said.
Government economists have said Switzerland’s unemployment rate could rise to 4.5% this year and 6% in 2021 from 2.9% in March.[pnL8N2BW5KI]
The government’s contribution to the unemployment compensation scheme is likely to rise, while it has also launched a 40 billion franc loan guarantee scheme to keep companies afloat.
The government said on Wednesday it would extend its loan guarantee scheme to innovative start-ups, which are struggling for cash as investors pull out and financing rounds are delayed.
The initiative, which will also be supported by Switzerland’s regional governments, will guarantee 100% of the loans the companies take out with commercial banks.
Switzerland’s public health ministry has reported 28,268 confirmed coronavirus cases to date, with 1,217 deaths.
The federal government also said on Wednesday it would provide one million masks per day for two weeks to retailers, as it prepares to allow shops to reopen from May 11.
But the country will not impose a general obligation on citizens to wear protective masks as in the Czech Republic, the northern Italian region of Lombardy and in Austria, where shoppers have to wear masks.
“Masks, and I really want to underscore this, can under no condition replace hygiene measures and distancing rules. Masks remain an additional protective step, on top of the basic protection measures,” Health Minister Alain Berset said.
The government repeated its guidance for residents, especially sick people, to stay at home.
Switzerland is due to start easing its restrictions from April 27, but the southern canton of Ticino has extended them until May 3. Ticino, bordering Italy, has been among the worst hit regions, accounting for a fifth of the Swiss death toll.
($1 = 0.9718 Swiss francs)
(Reporting by John Revill; Editing by Michael Shields and Gareth Jones)