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Swiss economy might not outpace Germany for a while

Swiss economy might not outpace Germany for a while

SWITZERLAND: If the Swiss economic growth is still left in the shade by Germany this week, its central bank knows exactly why. Two-and-a-half years after suffering an exchange-rate shock that made its exports even more expensive, Switzerland has yet to rediscover its knack of outperforming neighboring Germany. While the two economies boast significant similarities, prompting the Swiss to dub their northern neighbor “the big canton,” forecasts suggest it will only be in 2018 that the smaller country can pull ahead once more.

Switzerland’s weaker momentum will probably be evident again on Thursday, when first-quarter gross domestic product figures are due. Economists forecast growth of 0.5 percent for the three months through the end of March, falling short of Germany’s 0.6 percent. The strong franc is a problem “we’ve got to get to grips with,” said Juerg Werner, chief executive officer of Metall Zug AG, which makes products ranging from washing machines to wire-cutting devices and hospital sterilization equipment. “It remains quite difficult, but that is the challenge for Switzerland.” Momentum took a hit when the franc surged against the euro in early 2015 after the Swiss National Bank scrapped its cap with the single currency. Profits suffered and companies responded by slashing input costs and jobs, while boosting automation and even moving production abroad. While aggregate output has since recovered, some companies — particularly in the manufacturing, electrical and metals industries — are still smarting. A study prepared for the SNB’s March policy assessment found that almost 40 percent of firms rated their utilization of production capacity as below normal. Roughly the same proportion of company representatives said margins were lower than usual.