Switzerland recorded CHF12 billion deficit in second year of pandemic

Many restaurants and other businesses in Switzerland have been badly affected by the Covid-19 pandemic. Keystone / Salvatore Di Nolfi

Switzerland’s budget faced a shortfall of CHF12.2 billion ($13.2 billion) in 2021 due to the Covid-19 pandemic, the government announced on Wednesday. This follows a CHF14.2 billion deficit in 2020.

The 2021 deficit is twice as high as the budgeted figure. Last year the federal authorities spent CHF14 billion to deal with the pandemic, of which CHF12.3 was for extraordinary expenditures, the government said in a statementExternal link.

Revenue was up last year by 5.6% compared with 2020. Value-added tax brought in CHF1.4 billion more revenue than in 2020 and direct federal taxes generated an additional CHF1.2 billion.

Earnings from the Swiss National Bank (SNB) were also CHF700 million higher than a year earlier. An additional CHF1.3 billion will be used to reduce the coronavirus-related debt, the government noted.

Expenditure was also higher in 2021 (+0.5%), mostly due to pandemic-related measures. The biggest outlays were for short-time working compensation (CHF4.3 billion), hardship assistance (CHF4.2 billion) and Covid-19 loss of earnings compensation (CHF1.8 billion).

At the end of last year, the federal government registered a debt of CHF109 billion – up by CHF5 billion.

To avoid tax increases or a savings programme to repay the debt, the Federal Council (executive body) is proposing to amend the Financial Budget Act. It will submit its message to parliament in March.

The government believes that by 2023 Swiss fiscal policy will have returned to normal; it does not expect any additional extraordinary Covid-related expenditure. The Federal Council estimates a CHF600 million budget surplus for 2023.