Swiss franc overvalued, big challenge for businesses

The Swiss franc’s high value continues to have a negative effect on the confederation’s economy, especially compared to the euro quoted an expert as reporting on Monday.

Andrea Maechler, one of the three members of the Swiss National Bank’s (SNB) governing board, told Swiss newspaper Tribune de Geneve that in addition to the currency valuation, other factors including interest rates, changes in prices and the global situation must also be taken into account when assessing the confederation’s economic outlook.
“It’s clear that the strong Swiss franc remains a big challenge for many businesses in Switzerland,” Maechler told in the interview.

“The value of the Swiss franc is an important factor for Switzerland’s economy, but it is not the only one,” and added interest rates, inflation and the global situation are equally important.

According to the Swiss official, Swiss gross domestic product (GDP) is expected to increase by 1.5% this year, matching last year’s growth.

Switzerland’s unemployment rate, which stood at 3.3% in December last year, is also much lower than the 4.0% recorded in 2009 and the 5.0% in the mid-1990s, she added.

While expecting a gradual improvement in the labor market, Maechler noted that certain sectors, including Switzerland’s engineering and watchmaking industries, had been hampered by the strength of the Swiss currency, as well as by external factors such as the drop in Asian demand for timepieces.

When asked why the SNB was not striving to achieve an exchange rate of 1.10 francs per euro, Maechler reminded that “a country’s economy cannot rely on one magical number, as important as the exchange rate is.”

“Its competitiveness is linked to both its capacity to innovate and deal with the challenges which it must face,” she added. Acknowledging that the strong franc is hurting machinery and watch exports, she said that was not the only problem and pointed out the cyclical problems and the need for innovation.