The FIANNCIAL — In the aftermath of the Swiss National Bank’s decision on January 15 to dismantle the EUR/CHF exchange-rate floor, export sentiment among the more than 200 Swiss SMEs questioned by Switzerland Global Enterprise (S-GE) for its quarterly survey has plummeted to its lowest level since the launch of the survey back in 2010.
However, Swiss SMEs are exhibiting a fighting spirit, they continue to export abroad and are enhancing their competitiveness through targeted product innovations, according to Credit Suisse.
The Credit Suisse Export Barometer, which tracks foreign demand for Swiss products, currently stands at a level of 0.98 and thus has stayed practically unchanged near the historical mean of 1.00, which thereby would imply an average export growth rate going forward. However, the export barometer merely factors in international demand without taking exchange-rate developments into account.
Economist Lukas Gehrig from Credit Suisse Economic Research says: “The US economy is gaining speed. The appreciation of the US dollar against the Swiss franc makes Swiss export goods more affordable for US consumers. Furthermore, prospects in the Eurozone are brightening. Spain and Germany are sending positive signals. Accelerating economic activity in the Eurozone should mitigate the adverse effects of the strong Swiss franc somewhat.” However, the survey conducted by S-GE reveals that the strong Swiss franc is already hurting profit margins today for a good two-thirds (66%) of the Swiss SMEs questioned, which export primarily to the Eurozone.
“Exporting SMEs in Switzerland are not burying their heads in the sand in the face of the tough exchange-rate situation,” explains Alberto Silini, the Head of Consulting at S-GE. “Although the S-GE Export Outlook Index reading of 46.6 points is below the expansion threshold of 50, only 2% of the SMEs surveyed said that they want to withdraw from foreign markets. Twenty percent of them are actually even seeking out new and more lucrative customer markets. Diversification is exactly the right way to balance out currency risk in the long run while at the same time generating growth.” Right now, companies are placing their main emphasis on optimizing their procurement operations (59%). The survey respondents are also trying to cut their production costs (47%) and are stepping up product-innovation work (47%) and marketing efforts (39%) to boost their exports. “Exporters can justify higher prices if they deliver innovative added value, clearly differentiate themselves from the competition and emphasize their Swissness,” Mr. Silini advises.
The companies surveyed by S-GE said that the lineup of countries that they plan to export to over the next six months hasn’t changed much from the prior quarter. Europe was the most frequently cited export destination (mentioned by 91% of the SMEs surveyed), as it was in the previous quarter. The Asia-Pacific region has lost some importance (52% versus 57% a quarter earlier), as has North America (44% versus 46%). The significance of the Middle East/Africa region (29%) and South America (20%) as export destinations for Swiss SMEs remains unchanged.
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