In his last appearance before the press as President of the Swiss National Bank, Thomas Jordan warned that the franc is likely to appreciate against the euro, regardless of the SNB’s actions. To stay afloat, Swiss exporters will need to continue cutting costs to remain competitive with foreign competitors.

This is hurting the morale of Swiss companies. Over the past few months, Swissmem, the trade association for the machinery, equipment, and metalworking industries, has warned about the negative impact of the CHF's rise on exports. Now, the watchmaking industry is also raising concerns, urging the Swiss National Bank to intervene in its foreign exchange reserves.

Despite this, the figures demonstrate a reality that continues to impress the world: despite globalisation and the franc's continuing appreciation against most currencies, the Swiss economy is holding up. Remember, in the 70s, it took 10 Swiss francs to buy 1 sterling, and 4.5 francs to buy 1 US dollar. In fact, as the graph below shows, Swiss industrial production has grown by almost 40% since 2011, despite the franc's 25% appreciation against the euro. Have our neighbouring countries benefited from the euro’s depreciation? Not at all. In fact, industrial production has hardly grown in 15 years. In Germany, it has even declined since 2011. The contrast with Switzerland is striking.

In simple terms, this divergence can be explained mainly by the presence in Switzerland of a few important sectors with very high added value, which still stand out from the competition from emerging economies. These include pharmaceuticals, watchmaking, and chemicals.

Despite the 39.6% aggregate increase in Swiss industrial production since 2011, many sectors have seen their output decline over this period, due to the loss of market share to more competitive emerging producers. For example, production fell in the textile (-27%), electrical equipment (-11%), metal products (-12%) and machinery (-16%) sectors.

However, the three aforementioned high-value sectors recorded strong production increases over the period, pulling up the Confederation's industrial output: pharmaceuticals (+189%), watchmaking (+37%) and chemicals (+67%).

To broaden the debate and perspective, here's the same chart on industrial production (base 100 on 01.01.2011) including all major economies.

Industrial production

(Index rebased to 100 on January 1, 2011)

It is important to note the following:

• Unsurprisingly, China has experienced the strongest growth in industrial production, although the rate of increase has slowed in recent years.
• The USA and the UK have recently seen industrial production return to pre-Covid-19 levels. However, growth over the last 15 years has been weak, barely better than the downward trend in Europe.
• Some emerging economies have performed well (e.g. India, Mexico), particularly in recent years thanks to the phenomenon of “friendshoring” and “nearshoring”. South Korea's performance in recent years has been more mixed.