After the Swiss National Bank removed its ceiling on the franc’s rate against the euro in 2015, a dramatic appreciation in the currency created tough conditions for exporters. Since then, the franc has declined – and exporters, particularly in engineering and manufacturing, have focussed on becoming competitive again, says Lindenmeyer, who also serves as Chairman of the supervisory board of Schindler Management AG.
“Many companies have worked hard to streamline operations, cut costs and slim down, particularly with the pressure of exchange rates,” Lindenmeyer says. “Companies have managed to get back into shape and are in a position to benefit from a more favourable exchange rate.”
Risks to Growth
Economiesuisse has warned that this winning streak for the Swiss economy may come to an end sooner rather than later. It predicts economic growth may slow to 1.7 percent in 2019 from 2.7 percent this year. Export growth, though still strong, may weaken to 3 percent from 4 percent this year.
“The U.S. economy is booming as it hasn’t for many years, so we can assume that it will return to lower growth rates at some point,” Lindenmeyer cautions. First signs of a slowdown in the German auto industry will also impact Switzerland, he says. German car manufacturers in September warned that they might miss this year’s profit targets, partly because of the escalating trade war between the U.S. and China. That has already weighed on the stocks of Swiss auto component makers.
Increased protectionism in the U.S. threatens Switzerland directly too, Lindenmeyer says. “The steel industry, which isn’t particularly big in Switzerland, is already suffering from U.S. trade actions. This trade war will definitely have a dampening or a negative effect on the whole world economy.”
Promoting Free Trade
In this context, free trade agreements with partner economies are more important than ever, Lindenmeyer says. “There are moves towards a free trade agreement between Switzerland and the U.S., which is extremely important,” he says. “But it is also important to conclude the FTAs which are already in negotiation – such as with Mercosur,” the Latin American trade bloc comprising Brazil, Argentina, Uruguay and Paraguay.
“Agriculture plays a big role in a lot of the negotiations and we have to ensure that the Swiss agricultural lobby doesn’t hinder FTAs,” Lindenmeyer warns. “This is also a subject with Mercosur – above all in relation to meat.”
EU Framework Agreement
More important for the export outlook than any of these discussions are negotiations on a framework agreement with the European Union, by far the biggest market for Swiss companies, Lindenmeyer says. The agreement, which the EU wants to conclude this year, would create a process for five bilateral agreements to adapt to new EU legislation without requiring individual negotiations at every stage.
“This is absolutely crucial,” Lindenmeyer says. “A very high percentage exports go to the EU, and if this is threatened, then it would be a catastrophe for Switzerland. It overshadows everything. It is essential for the bilateral relationship.”
Brexit is also a concern for exporters, Lindenmeyer says. “Great Britain is export market No. 5 for Switzerland, and Switzerland is doing everything to ensure that if Brexit does happen, trade can continue undisrupted,” he says. “For insurers and banks particularly, Brexit is a big subject because they employ a lot of people in London, the world’s biggest international financial centre. There is uncertainty about whether these people can continue there or should be withdrawn, and some transfers have already taken place.”
