Impact of the Swiss franc crisis

The removal of the minimum exchange rate of CHF 1,20 per Euro by the Swiss National Bank this week created a lot of trouble on different markets worldwide. Because of the rise of the Swiss franc, the imports into Switzerland are going to become significantly cheaper, while exports are going to become much more expensive. Marc Wermelinger, CEO of SWISSCOFEL, the association of the Swiss fruit, vegetable and potato trade, can imagine two scenarios as a result from the Swiss franc crisis for the Swiss economy: “On one hand, the Swiss consumers will increasingly substitute expensive Swiss products by cheap imported products. On the other hand, the shopping tourism will increase significantly. Even before the rise of the Swiss franc, consumers spent around CHF 10 billion in the border areas of the EU.” According to Wermelinger there could also be a bigger loss of additional revenues: ”The pressure on the Swiss market and for their Swiss products will get significantly worse.”

Prices for imported products may fall
Prices for imported products have declined in recent days by about 15 to 20 percent. Around 50 percent of Swiss fruit and vegetable consumption are mainly imported from the EU countries with EU exchange rates. Wermelinger comments: “The retail sector has already announced plans to give these more favourable purchase prices to consumers. This of course will not be 20 percent for the consumer because of the sale costs in Switzerland and the Swiss wages and costs.”

The difference between the Frank and the Ruble is growing
The export of Swiss fruit and vegetables takes place in very small quantities. According to Marc Wermelinger, it is not like that because of the rise of the minimum exchange rate: “Even before the rise of the Swiss franc, the high price level was the reason that the products found no market abroad. Only specialities, certain qualities and varieties had regular markets abroad. But just in small amounts.” He also states that through the massive depreciation of the Ruble, the exports to Russia has almost completely stopped: “The increase in value of the Swiss franc makes this difference now even bigger. Swiss fruits and vegetables are not going to be exported to Russia as before. Swiss exports to Russia was only possible because the EU countries were no longer allowed to ship to Russia, since August 2014. The Russian importers searched with a certain desperation for alternatives. For the Swiss growers, the Russian market was a welcome opportunity to get rid of their large top fruit harvest until the end of 2014. But we were always aware that fruits and vegetables from Switzerland would no longer be competitive in Russia, once the EU can re-enter the Russian market again.”

Hope for improvement
SWISSCOFEL estimates that the Swiss purchasing power is currently still high. Wermelinger predicts, regarding the future market development: “Switzerland is generally an exporting nation. Two-thirds of the gross national product of the Switzerland is generated directly or indirectly by the export sector and its suppliers. If the exchange rate between the Swiss franc and the Euro remains at 1:1, then the Swiss companies will have to reduce their costs massively in order to remain competitive. Wages and the purchasing power in Switzerland will probably not be spared. Regardless of location, companies are considering outsourcing of parts of production abroad.” Wermelinger hopes that the uncertainty in the markets quickly fades and confidence in the Euro rises again: “Only when this happens will Switzerland get rid of the unwanted role as a “safe haven” for unsettled investors. “

More information:
Marc Wermelinger
SWISSCOFEL
Belpstrasse 26
CH-3001 Bern
T. +41 31 380 75 75
F. +41 31 380 75 76
marc.wermelinger@swisscofel.ch
www.swisscofel.ch