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    Special Report: How can we emerge from the COVID-19 Crisis?
    Patrick Odier, Senior Managing Partner

    corporate

    Special Report: How can we emerge from the COVID-19 Crisis?

    The coronavirus pandemic has changed the face of Switzerland. In a little under two months, this unprecedented crisis has taken the lives of more than 1,300 people and put a quarter of the Swiss population out of work. Worldwide there have been over 2,4 million cases and almost 170,000 deaths.

    On 16 April, Radio Télevision Suisse held a special edition of their show “Temps present” followed by an Infrarouge debate, where our Senior Managing Partner, Patrick Odier, discussed the impact of the virus on Switzerland and the measures put in place by the Federal Council earlier that day. Around the table were representatives from the medical, public health and economic sectors including: Rebecca Ruiz, Vaud Cantonal Councillor and Head of the Department of Health and Welfare, Samia Hurst, Physician and Bioethicist, Bernard Rüeger, Industrialist and Vice-President of economiesuisse and Didier Trono, Head of the Virology and Genetics Laboratory at the Swiss Federal Institute of Technology Lausanne.

    In a little under two months, this unprecedented crisis has taken the lives of more than 1,300 people and put a quarter of the Swiss population out of work.

    As confirmed by the Federal Council, from 27 April Switzerland will allow a gradual re-opening of the economy beginning with a three-stage relaxation process to control the evolution of the virus.

    Health must come first

    The three-stage crisis exit strategy put forward by the Federal Council offers the country hope, declared Rebecca Ruiz. "We have succeeded in putting health first but the mobilisation is not yet over," she commented. "The strategy is a prudent one, but we will only truly come out of the crisis when there is a vaccine," remarked Samia Hurst. "It is important to stay vigilant." According to Didier Trono, a member of the Federal Council’s COVID-19 scientific taskforce, "It is likely that only a miniscule percentage of the population has been infected. People remain at risk." Tracking new cases will be essential to monitor how the virus evolves.

    Asked about the economy re-opening, Patrick Odier expressed support for the actions taken by the Federal Council. "We are in a situation that is exceptional and unprecedented, that’s affecting society and all of humanity. At the moment, public health must set the priorities and outweigh economics." Patrick Odier regards the phased plan as justified and judicious. "Caution is the order of the day. A resurgence of the epidemic would prevent the economy from re-starting," he pointed out.

    At the moment, public health must set the priorities and outweigh economics, shared Patrick Odier.

    What about the measures to protect the population when things do re-open? The debate focused on the issue of wearing masks and the fact that Switzerland is unable to produce them. According to Didier Trono, "the situation shows that Switzerland lacks the manufacturing chain to respond to this sort of crisis." Everyone agreed that Switzerland has to be able to produce "simple" masks in the event of an epidemic. For Patrick Odier, the crisis is acting as a catalyst for manufacturing trends. "Countries should be capable of producing these products; they are a basic requirement. Taking into account the availability of raw materials, manufacturing must become more localised as new ‘essential’ supplies are made at a national level."

    For Samia Hurst, masks do not provide optimal protection. "The protection is modest," she noted. Wearing a mask gives reassurance, but social distancing and hygiene measures have to take priority, she pointed out.


    Kick starting the economy

    Measures to support the economy can only be effective if the risk of a resurgence of the virus is under control. The Federal Council announced an initial CHF 40 billion package to help the economy. At a much-awaited press conference on 16 April it went further, by monitoring companies at risk of bankruptcy and offering an eagerly anticipated helping hand to independent businesses with annual revenues of less than CHF 90,000. They can be compensated for loss of earnings.

    Patrick Odier also highlighted the country’s entrepreneurial spirit and the advantages of an economy that has a dense and deeply committed business community network. "The measures taken by the authorities are key, because they provide oxygen to the small and medium-sized companies that make up the fabric of the Swiss economy and this country’s success. Once the pandemic has been brought under control, they will be ensure a firm recovery. They are the ones who have made our country a success today, and they will do so again tomorrow. Supporting them is crucial.”

    The measures taken by the authorities are key, because they provide oxygen to the small and medium-sized companies that make up the fabric of the Swiss economy and this country’s success, underlined Patrick Odier.

    Switzerland has a long history of cooperation between the private and public sector. In fact, compared to other countries, it has plenty of tools at its disposal to support the economy, such as part-time working and temporary lay-offs. Our Senior Managing Partner also drew attention to the speed with which the aid scheme worked. "The banking system granted CHF 15 billion in secured loans to almost 80,000 small and medium-sized companies in less than a week. That is unheard of. I don’t think you would see such speed of execution anywhere else in the world." But Patrick Odier warned that this was just the first stage. "This assistance was necessary, and more will definitely be needed."

    With 25% of the population currently unemployed, Rebecca Ruiz emphasised the urgency of putting restart plans in place and creating jobs. "We have to start hiring people again to avoid a crisis in our society."

    Bernard Rüeger noted that Switzerland has more room for manoeuvre in relaunching its economy than neighbouring countries because of its favourable financial position. "Allowing for the amounts of investment announced, public debt in Switzerland will be 45% of GDP, compared to 80% in Germany, well over 100% in France and probably almost 150% in Italy."


    Recession or renewal?

    According to Patrick Odier, "around 40% of the global workforce is standing idle. We have to do something, but not at the expense of people’s health. If we follow and comply with the measures announced, we have a chance to limit this economic difficulty and allow a real recovery."

    This pandemic is speeding up trends in logistics, technology, globalisation, geopolitics and above all sustainability.  The industries affected by the crisis, like the energy sector, will have to innovate. Patrick Odier went on to say that, "The fossil fuel industry is under huge pressure right now. The unprecedented global fiscal recovery programmes will need to be directed towards more sustainable investments. "

    This pandemic is speeding up trends in logistics, technology, globalisation, geopolitics and above all sustainability. 

    Consumers are changing their habits and demanding different services. The Swiss economy is services based; the tertiary sector dominates. How has this interpersonal relationship in a context of confinement changed supply and demand? “I am convinced that new services and new technologies are emerging and they will allow, in particular, small and medium-sized companies in Switzerland to recover and continue to develop," concluded Patrick Odier.

    Important information

    This document is issued by Bank Lombard Odier & Co Ltd or an entity of the Group (hereinafter “Lombard Odier”). It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a document. This document was not prepared by the Financial Research Department of Lombard Odier.

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