Switzerland’s economy shrank the most in six years as the strong Swiss franc took its toll on exports.
GDP fell 0.2 percent in the first quarter, after a revised growth of 0.5 percent in the previous three months, Switzerland’s State Secretariat for Economic Affairs said in a statement on Thursday. The contraction is the biggest since 2009 and missed the median economist forecast for stagnation.
With the franc still overvalued, according to the Swiss National Bank (SNB), the risk is that the weakness persists. The data also hand ammunition to the central bank’s critics, who say its January decision to give up the cap versus the euro is jeopardizing the economy. The ceiling exit caused the franc to surge to a record high against the euro in the first quarter, a particular hardship for industrial companies that export a large proportion of their wares.
“We’ve got the first sign of a recession, the second quarter surely won’t be better,” Bank J Safra Sarasin Ltd Zurich-based chief economist Karsten Junius said, adding that the SNB would not necessarily have to revise its growth outlook for this year.
“I think the SNB will be able to shrug this off,” he said.
SNB president Thomas Jordan predicts the economy would grow “just under” 1 percent this year, half of what was forecast when the cap of SF1.20 per euro on the franc was still in place. In the first quarter, the franc rallied 15 percent against the euro, the biggest such increase since the single currency was introduced in 1999. The franc traded at SF1.03512 against the euro at 9:18am in Zurich yesterday, little changed from a day earlier.
So far, SNB policymakers have not predicted a recession — two consecutive quarters of contraction. In fact, SNB Vice President Jean-Pierre Danthine said last week that there would only be “probably one bad negative quarter.”
While Swiss reactions to the SNB’s abandonment of its cap have generally been benign, the prospect of slowing growth and rising joblessness has prompted criticism from members of the Social Democratic Party, the second-biggest party in the Swiss parliament, who have called for the establishment of a new minimum exchange rate. Trade union Unia called on the central bank’s board to resign.
“I think the SNB accepted the risk of a slowdown in growth when they gave up the cap,” Credit Suisse Group AG Zurich-based economist Maxime Botteron said. “I don’t think they’ll necessarily have to revise down their growth forecast.”
The central bank is set to publish updated growth and inflation forecasts at its next policy review on June 18.
Recent surveys have indicated a slowdown in momentum. A manufacturing sector gauge has signaled contraction and exporters have experienced revenue and prices declines in the first quarter. This months reading of the KOF Swiss Economic Institute barometer indicated that “the Swiss economy can be expected to exhibit growth rates clearly below average,” according to a statement issued yesterday.
In the first quarter, exports of goods fell 2.3 percent and a “significant negative contribution came from the category of chemicals, pharmaceuticals,” the State Secretariat for Economic Affairs said.
Machinery, electronics, precision tools and watches also declined. At the same time private consumption increased 0.5 percent thanks to growth in the housing, energy and health sectors.
According to the IMF, Swiss growth is set to slow this year to 0.75 percent, due to the unfavorable exchange rate, with unemployment set to increase moderately.
Stephen Garrett, a 27-year-old graduate student, always thought he would study in China, but first the country’s restrictive COVID-19 policies made it nearly impossible and now he has other concerns. The cost is one deterrent, but Garrett is more worried about restrictions on academic freedom and the personal risk of being stranded in China. He is not alone. Only about 700 American students are studying at Chinese universities, down from a peak of nearly 25,000 a decade ago, while there are nearly 300,000 Chinese students at US schools. Some young Americans are discouraged from investing their time in China by what they see
MAJOR DROP: CEO Tim Cook, who is visiting Hanoi, pledged the firm was committed to Vietnam after its smartphone shipments declined 9.6% annually in the first quarter Apple Inc yesterday said it would increase spending on suppliers in Vietnam, a key production hub, as CEO Tim Cook arrived in the country for a two-day visit. The iPhone maker announced the news in a statement on its Web site, but gave no details of how much it would spend or where the money would go. Cook is expected to meet programmers, content creators and students during his visit, online newspaper VnExpress reported. The visit comes as US President Joe Biden’s administration seeks to ramp up Vietnam’s role in the global tech supply chain to reduce the US’ dependence on China. Images on
New apartments in Taiwan’s major cities are getting smaller, while old apartments are increasingly occupied by older people, many of whom live alone, government data showed. The phenomenon has to do with sharpening unaffordable property prices and an aging population, property brokers said. Apartments with one bedroom that are two years old or older have gained a noticeable presence in the nation’s six special municipalities as well as Hsinchu county and city in the past five years, Evertrust Rehouse Co (永慶房產集團) found, citing data from the government’s real-price transaction platform. In Taipei, apartments with one bedroom accounted for 19 percent of deals last
US CONSCULTANT: The US Department of Commerce’s Ursula Burns is a rarely seen US government consultant to be put forward to sit on the board, nominated as an independent director Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s largest contract chipmaker, yesterday nominated 10 candidates for its new board of directors, including Ursula Burns from the US Department of Commerce. It is rare that TSMC has nominated a US government consultant to sit on its board. Burns was nominated as one of seven independent directors. She is vice chair of the department’s Advisory Council on Supply Chain Competitiveness. Burns is to stand for election at TSMC’s annual shareholders’ meeting on June 4 along with the rest of the candidates. TSMC chairman Mark Liu (劉德音) was not on the list after in December last