Switzerland braces for growth challenges of franc appreciation

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Following the lifting of the fixed exchange rate between franc and euro, the Swiss Governments economic expert group announced a likely downgrading of economic forecasts due to the persistent appreciation of the Swiss Franc.

Previous official forecasts released on 18 December 2014 assumed that the Swiss economy would grow by 2.1% in 2015 and 2.4% in 2016. While the expert group remained reluctant to adjust the official figures until March 2015, it suggested a deterioration would be likely.

“As a result of a sharp appreciation of the Swiss currency, manufacturing companies in Switzerland are suffering from a significant loss of price competitiveness. The level of uncertainty for these companies has also increased. The 1.20 floor on the CHF/EUR exchange rate was a key stabilising factor for Swiss firms and has now suddenly disappeared. Initial reports indicate that numerous companies see the loss of planning possibility as a serious setback for investments and production plans” the expert group stated.

Other revised economic forecasts vary widely, with the Zurich-based think tank KOF predicting a decline to -0.5%.

Meanwhile, the impact of the SNB decision on consumer confidence seems to be limited, according to the latest survey conducted by the Swiss Federal administration, Swiss consumer confidence remains largely stagnant at -6% in January 2015.

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