strong currency makes for a successful country. i.e Switzerland

Discussion in 'Economics' started by zdreg, Aug 28, 2015.

  1. zdreg

    zdreg

    Switzerland avoids recession despite steep rise in franc Ralph Atkins in Zürich Share Print Clip Comments A Swiss national flag flies from a flagpole above Lake Geneva in Geneva, Switzerland, on Wednesday, June 5, 2013. Members of the Swiss parliament's upper house's economic committee have been debating a law which, if passed, could authorize Swiss banks to cooperate with U.S. authorities. Photographer: Valentin Flauraud/Bloomberg ©Bloomberg Switzerland has unexpectedly escaped falling into recession, with the affluent Alpine economy weathering a steep rise in the value of the Swiss franc. Gross domestic product increased 0.2 per cent in the three months to June, according to official data released on Friday, despite economists overwhelmingly expecting a contraction. In the first three months of the year, Switzerland’s economy had contracted by 0.2 per cent. A recession is defined as two quarters of negative growth. More On this topic Swiss shoppers stock up on eurozone goods Face to Face Bankers abused the Swiss label of quality Swiss fountain of youth for Source The Big Picture ‘Every [Swiss] pension fund is worried’ IN Europe Four held as truck death toll rises to 71 Grim find shakes migrant crisis talks Tsipras gambles on outright poll victory Tsipras’s main rivals in Greek poll race Sign up now firstFT FirstFT is our new essential daily email briefing of the best stories from across the web On January 15, the Swiss National Bank rocked financial markets and Swiss business when it gave up attempts to cap the franc’s value against the euro. Switzerland’s export-oriented manufacturers have been hit badly by the franc’s strength — a side effect of the European Central Bank’s “quantitative easing” programme to prevent the eurozone falling into a deflationary slump. The country was also widely expected to become a casualty of economic turbulence and aggressive monetary policies in other parts of the world. But Swiss hoteliers and tourist resorts have not fared as poorly as expected during the summer season, thanks in part to good weather and tourists from emerging market economies. Unemployment, meanwhile, remains low and second-quarter growth was boosted by consumer spending — even though price-conscious Swiss shoppers are increasingly crossing the border to shop in neighbouring eurozone countries. The steep currency appreciation “was a shock but it was less severe than we expected — and that is a bit of a surprise”, said Yngve Abrahamsen, senior analyst at the Zürich-based Kof Swiss economic institute. Thomas Jordan, the SNB’s chairman, has warned repeatedly that the franc is overvalued. But despite setting the lowest interest rates in the world, the SNB has failed to weaken the currency significantly. “We have better [growth] data than expected — but ‘better’ is not ‘good’. This is still far below Switzerland’s potential growth rate,” warned Claude Maurer, economist at Credit Suisse. Switzerland’s economy remains gripped by deflation with the franc’s steep rise forcing exporters to slash prices and cutting import costs. Annual inflation was minus 1.3 per cent in July. “We don’t see any growth impulses in the near future,” Mr Maurer added. During the Greece crisis, the franc acted as a haven for investors. Although it lost some of that status during the financial market turbulence of recent weeks, it remains about 11 per cent higher both against the euro and on a trade-weighted basis than before the January 15 decision. More video The “Frankenschock” has left deep scars on the country’s manufacturing sector, and is likely to be a campaign theme ahead of Swiss federal elections on October 18. New orders in the second quarter were the lowest since early 2009, when the world economy was reeling from the collapse of Lehman Brothers, the Swissmem industry association reported last week. “We’re still in the middle of this crisis, we don’t know when it is going to end,” said Ivo Zimmermann, Swissmem executive board member. A Swissmem survey of 400 companies showed 35 per cent expected to report an operating loss in 2015. Among those complaining loudest are Swiss watchmakers, which have seen demand tumbling for their luxury products as a result of the slowdown in Chinese growth and Beijing’s crackdown on corruption. Swiss watch exports in July were 9.3 per cent lower than a year earlier with sales to Asia down 21.4 per cent, according to the Swiss watch industry federation. 35% of 400 companies surveyed by the Swissmem industry association expect to report an operating loss in 2015 January’s “Frankenschock” also alarmed the tourist sector, which feared steep falls in visitor numbers, especially from eurozone countries. Hoteliers in city locations, however, reported their worst fears had not been realised. Patrick Hauser, joint owner of the luxury Schweizerhof hotel in Lucerne — with its historic buildings and breathtaking views of the Alps, a popular destination for Asian visitors — said US visitor numbers had remained stable while there had been a “tremendous increase” in tourists from Gulf states. “On January 15 and 16 it was really hectic around here but looking at the situation now, we’re really happy with the way things turned out,” Mr Hauser said. In the St Moritz mountain resort, near the Italian border, bookings at the start of the summer were 10 per cent lower than a year before. But the year-on-year drop is expected to be nearer 5 per cent by the end of the season in late October, according to the local tourist association. “The nice weather half-compensated for the strong franc,” reported Ariane Ehrat, the association’s chief executive. Few in the industry are confident about making predictions for the coming months, however. Ms Ehrat said worries about future tourism flows from China and countries such as Russia “are something that we can feel . . . I’m not ready now to give you a forecast for the winter season”. <http://www.ft.com/intl/cms/s/0/784f9372-4d53-11e5-b558-8a9722977189.html#axzz3k7V6wya1>

    in time swiss manufacturers will adjust to strong currency by becoming more efficient.
     
  2. zdreg

    zdreg

    there are too many posters on ET, like piezoe, who buy into the line that a country can devalue its way into prosperity
     
    Last edited: Aug 28, 2015
  3. loyek590

    loyek590

    beats the heck out of paying back what you owe
     
  4. Jakobsberg

    Jakobsberg

    Think the title is mixed up.
    Successful country make strong currency not the other way around.
     
    piezoe and Mr.Wahdy like this.
  5. zdreg

    zdreg

    you are correct. consider it my fat finger error of the week.