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UPDATE 1-Swiss gov't expects less severe GDP hit in 2020 from COVID-19

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ZURICH, Sept 9 (Reuters) - The Swiss government expects the economy to be less badly damaged by the COVID-19 outbreak than previously thought, it said on Wednesday, now seeing a 5% drop in annual GDP in 2020 rather than the previous forecast for a contraction of 6.2%.

The government, in an interim assessment, said Switzerland’s recovery from lockdown measures has been more rapid than projected, with the rise in unemployment also expected to be less bad than previously thought.

The average jobless rate for the year is now expected to be below 3.5%, the State Secretariat for Economic Affairs (SECO) said, lower than the June forecast for 3.8%.

“Switzerland has so far come through the crisis relatively lightly by international standards,” the government said, although adding that a recovery depended on no strong second wave of the virus appearing.

Switzerland’s export-driven economy has been badly hit by the shutdown and closure of foreign markets this year.

GDP fell by 8.2% in the second quarter, the biggest shrinkage on record, while output fell by 2.5% in the first three months of the year.

But since May foreign trade has increased while private consumption has recovered rapidly after shops re-opened in June, the government said, citing retail sales figures and credit card payments.

Short-time working compensation, where the government pays part of the wages of furloughed staff, has also been used less than originally expected, the government said.

Reporting by John Revill; Editing by Michael Shields