Coro­n­avirus: its im­pact on Swiss com­pa­nies

economiesu­isse’s poll showed that Swiss com­pa­nies are tak­ing the sit­u­a­tion se­ri­ously, how­ever with­out ced­ing to un­jus­ti­fied panic. Many of them in­tro­duced pre­ven­tive mea­sures to shield the em­ploy­ees and try to main­tain pro­duc­tion at the usual level, often by lim­it­ing un­nec­es­sary trav­els. Em­ploy­ees com­ing back from Coro­n­avirus hotspots are put in quar­an­tine fully paid. Home-of­fice is fre­quent and sen­si­bil­i­sa­tion on hy­gienic mea­sures is fos­tered.

In­ter­rupted sup­ply chains

One of the biggest con­cerns of Swiss com­pa­nies is that in­ter­na­tional sup­ply chains might be in­ter­rupted. Most com­pa­nies are not yet fac­ing the prob­lem, es­pe­cially be­cause of sub­stan­tial in­ven­to­ries. Some other pre­ven­tively in­creased them. Be­cause of that, Swiss com­pa­nies’ pro­duc­tion hasn’t ex­pe­ri­enced any con­sid­er­able de­crease yet. This is be­cause the virus’ out­break in China co­in­cided with the Chi­nese New Year in Jan­u­ary, when Chi­nese pro­duc­tion is tra­di­tion­ally low.

How­ever, the longer the cri­sis will last, the more prob­lems com­pa­nies will face. Swiss com­pa­nies ex­pect in­creas­ing de­liv­ery de­lays caused by clo­sure of fac­to­ries, longer trans­porta­tion pe­ri­ods and de­pleted stocks. Some en­ter­prises are al­ready ex­pe­ri­enc­ing short­ages of spe­cific com­po­nents, like rare-earths, raw ma­te­ri­als to pro­duce syn­thetic ma­te­ri­als and com­po­nents for the elec­tron­ics sec­tor. Some com­pa­nies ex­pect the sit­u­a­tion to im­prove around April, oth­ers dur­ing sum­mer.

Diminu­tion of sales

Swiss com­pa­nies are also af­fected by the de­crease in sales in China. Per­sonal con­tact with clients has be­come dif­fi­cult, due to travel re­stric­tions in­side the coun­try and cross bor­der. New ma­chines can­not be in­stalled in China, be­cause tech­ni­cal per­son­nel can­not enter the coun­try. Prod­ucts have a hard time being reg­is­tered, be­cause re­spon­si­ble Chi­nese au­thor­i­ties do not work as usual. 

The fall in de­mand di­rectly strikes the or­ders of in­vest­ment goods. The lux­ury in­dus­try (watches, to­bacco, …) is wit­ness­ing the diminu­tion of Chi­nese de­mand, both from in­side China and Chi­nese tourists in Switzer­land. Of course, the most af­fected sec­tor is tourism: the num­ber of vis­i­tors has con­sid­er­ably di­min­ished, and this trend will con­tinue.

It is yet im­pos­si­ble to eval­u­ate the fi­nan­cial con­se­quences for Swiss com­pa­nies, also be­cause there is still un­cer­tainty when it comes to in­sur­ances’ com­pen­sa­tion of dam­ages.

Tem­po­rary slow-down of the world’s econ­omy

The de­crease in pro­duc­tion and de­mand will neg­a­tively im­pact the an­nual re­sults of ex­port­ing com­pa­nies. The longer un­cer­tainty per­sists, the heav­ier will be the eco­nomic con­se­quences.

It is likely that COVID-19 will have a greater im­pact on the world’s econ­omy than it was the case in 2003, with the SARS epi­demic. The lat­ter es­pe­cially af­fected China how­ever, the con­text has fun­da­men­tally changed since. Today, China rep­re­sents 20% of the world’s GDP and its econ­omy is way more glob­ally in­te­grated than it was the case in 2003. Nowa­days, when Chi­nese econ­omy is in trou­ble, the world feels it. The pos­i­tive side is that the fall of sales will be just tem­po­rary.