Another franc appreciation shock – SNB and politicians called on to act

The Swiss technology industry, which employs over 330,000 people, exports 80% of its products and accounts for close to 30% of Swiss exports. As a globally networked sector – which is dominated by SMEs – the industry has been in a recession since early 2023, with significant declines in orders in key markets such as Germany and China. 

Since the early summer, the bottom of the downturn has been in sight – this nascent upswing now risks being throttled by the renewed appreciation of the Swiss currency. At times, one euro was worth just 92 centimes; the subsequent slight weakening could be due to forex intervention by the SNB. 

If, owing to the inflation differential of 1%-2%, purchasing power parity is currently around 98 centimes, the industry is suffering from overvaluation of around 6% vis-à-vis the euro. The industry has learned how to deal with a strong Swiss franc. But even with harsh savings and efficiency drives it is not able to defend itself against shock-like appreciation. The rapid appreciation of the franc is therefore a threat to Switzerland as a business location compared to competition from Europe or Japan. 

Time for the SNB to take further steps

Swissmem respects and defends the independence of the Swiss National Bank. The SNB has moved swiftly and effectively to bring the inflation rate down to below the 2% mark, thus creating price stability. The SNB now has the scope to use the best instruments at its disposal to prevent or cushion any shock-like appreciation in future too, as it stated in its monetary policy assessment on 20 June 2024.  

... as well as politicians

However, the SNB only has limited resources. Action on the political front is thus all the more important. Politicians are now called on to set the right course for Switzerland as a strong location for industry. They must advance reform projects with vigour and prevent cost drivers. The free trade agreement with India is important, as is the rapid stabilization of the relationship with Europe via the Bilateral Agreements III – without any damaging accompanying measures. The third element required is legal and investment certainty: Parliament should forego the Investment Screening Act, and the Young Socialists' "For the Future" initiative must not succeed. All these measures will only deliver improvements in the medium term, but companies' trust in very good and stable operating conditions in the long term is a key anchor for firms based in Switzerland.