Switzerland posted its highest ever trade surplus in 2019, data published on Tuesday showed, heaping extra pressure on the Swiss National Bank to justify its policies to weaken the strengthening Swiss franc.
Booming pharmaceuticals exports increased the merchandise trade surplus by nearly a fifth to 37.3 billion Swiss francs ($38.55 billion), according to the Swiss customs office.
Exports rose 3.9 per cent to 242.4 billion francs, driven almost entirely by the chemical and pharmaceuticals industry where Novartis and Roche ROG.S both raised their sales outlook last year.
The widening trade surplus could make life more difficult for the SNB after Switzerland appeared on a US Treasury watch list of potential currency manipulators.
The Treasury cited Switzerland’s large bilateral goods trade surplus with the United States as well as its overall current account surplus.
Switzerland ran a 27.65 billion franc surplus last year, up from 25.38 billion in 2018 and 21.08 billion in 2017. Exports to the US market have doubled since 2011. Switzerland typically runs a deficit in bilateral services trade, although 2019 data have not yet been released. The SNB’s foreign currency purchases are designed to prevent deflation and prevent Swiss products from being priced out of foreign markets by the franc’s appreciation.
The SNB insists its interventions and negative interest rates are not aimed at conferring advantages for Swiss exporters by undervaluing the currency. The SNB’s policy has come under the spotlight again with the safe-haven franc climbing to its highest level since April 2017 this week.
“These statistics are a risk for Switzerland, given that it is on the US monitoring list,” said ING economist Charlotte de Montpellier, noting the 9.1 per cent rise in goods exports to the United States during 2019.
“It is a risk above all because Swiss exports to the US have risen sharply, and bilateral trade is one of the criteria monitored by the US to categorise a country as a currency manipulator,” she said.
Still, she didn’t think the increase would change SNB policy on currency interventions.
The trade balance will make it harder for the SNB to explain its policy to the US Treasury, said Yngve Abrahamsen, an economist at Zurich’s Federal Institute of Technology (ETH).
“But the SNB cannot allow the franc to appreciate in an unlimited way, that would be very damaging to Swiss industry,” he said.
“So they may have to intervene and try to explain to the Americans it is not to boost Swiss exports, but to protect the Swiss economy.” — Reuters