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Swiss economy grows, exports gain foothold in face of "franc shock"

[ZURICH] Switzerland's economy grew an unexpected 0.9 per cent and exports showed signs of resilience in 2015 in the face of a sharp rise in the franc and what some executives said was one of the toughest years they could remember.

Economists said the growth, based on preliminary figures released by the State Secretariat for Economic Affairs (SECO) on Wednesday, was a strong performance for a year when the currency soared more than 25 per cent against the euro in a single day.

The rise was caused by the Swiss National Bank's decision in January last year to lift limits on the franc which had been in place since September 2011.

Exporters of goods (excluding valuables) slashed prices by 6 per cent in 2015, SECO said, and a rise in the volume of goods exported in the second half mainly resulted from strong sales abroad for Switzerland's price-resilient pharmaceutical and chemical companies.

In all other categories real exports either stagnated or declined slightly in the final quarter, though economists said the exporters were showing signs of adapting to current exchange rate levels.

While growth came in behind European peers and a full per centage point below the 1.9 per cent rise posted in 2014, results overshot expectations and fears. "Growth was at its weakest since the financial crisis, so the franc shock did have an effect," UBS economist Alessandro Bee said. "But the worst fears for a recession did not materialise." Bee called the growth "remarkably robust". "No one would have expected these results a year ago," Zuercher Kantonalbank economist Cornelia Luchsinger said.

The provisional results topped even government estimates from as recently as December after a strong fourth quarter overshot expectations.

ZKB expects growth to pick up to 1.2 per cent this year, while UBS forecasts it to accelerate to 1.4 per cent. SECO will update its forecasts on March 17 after saying late last year it expected growth to accelerate to 1.5 per cent based on improvements in the global economy.

But weak economic data and uncertain financial markets from China to the United States have cast doubt over global growth, and economists from research group BAKBasel and UBS see clear downside risks. "Is the franc shock over? I think we're still going to feel the afterpains this year," Luchsinger said. "We'll see further increases in unemployment. But on the whole, a relatively solid, if below potential, development."


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