Like every other country, Switzerland is engaging in a beggar-thy-neighbor strategy and relying on their weaker currency to heal an ailing export industry. The small country’s efforts have paid off and its economy, along with related exchange traded fund (ETF), may get a welcomed boost from the extra activity.
Switzerland’s government adjusted for a recovery in the country’s export demand and raised GDP forecasts up to 0.7% in 2010, followed by a 2% expansion in 2011, but not before an estimated 1.6% drop in 2009, reports Klaus Wille for Bloomberg. The Swiss National Bank (SNB) projects a contraction of 1.5% this year, followed by an expansion of 0.5% to 1% in 2010.
The small country’s contraction ended in the third quarter, with industrial production growing 3.4% in the quarter on an export rebound.
Additionally, the government expects consumer-price growth to drop 0.5% this year while increasing 0.8% in 2010 and 0.7% in 2011. Inflation is calculated to average 0.9% next year. Joblessness is expected to be 3.7% this year and to rise to 4.9% in 2010 and 2011. [United Kingdom set for a spill?]
The SNB is selling its currency to ward off deflation and heal the economy, but the Swiss franc has appreciated beyond 1.50 per euro for the first time since March, report Klaus Wille and Lukanyo Mnyanda for Bloomberg. Currency strategists believe that the bank will have to intervene to maintain acceptable forex levels. The SNB sold francs after appreciating to a five-month high against the euro and hitting parity with the dollar for the first time in 19 months. [ETFs hit by weak euro.]
For more information on Switzerland, visit our Switzerland category.
- iShares MSCI Switzerland (NYSEArca: EWL): up 21.2% year-to-date
- CurrencyShares Swiss Franc Trust (NYSEArca: FXF): up 1.8% year-to-date
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.