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Strong franc leading to slower growth

The appreciating Swiss franc has caused the State Secretariat for Economic Affairs (Seco) to lower its GDP growth forecast for next year from 1.9 to 1.5 per cent.

However, Seco maintained its prediction of 2.1 per cent growth for 2011, in its quarterly forecast published on Tuesday.

In May, the Swiss franc reached record highs against all major currencies. The real effective exchange rate of the franc, which measures it against a basket of foreign currencies, has also now reached an all-time high.

Seco said the real exchange rate appreciation had a “strong, negative impact” on price competitiveness, with several companies lowering their export prices in order to remain competitive, and warned that export volumes could suffer into next year. 

It notes that the positive performance of the economy this year and next – despite the strong franc – is due mainly to high domestic demand, driven by investment in construction and private consumption.

But on the assumption that the demand for safe currencies like the franc would remain high, Seco warned that additional pressure on the Swiss franc would “jeopardise economic growth to a serious degree”. and agencies

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