Currencies

Swiss companies expect the franc to strengthen in 2025

The geopolitical risks are likely to cause the franc to strengthen further on the currency markets. (Archive image)

Keystone

In view of the geopolitical risks, companies in Switzerland are taking a cautious view of economic and exchange rate developments. They expect the Swiss franc to strengthen slightly against the euro and the US dollar to fall below 90 centimes.

Keystone-SDA

14.01.2025, 10:24

In a survey conducted by UBS in the fall, almost half of the companies surveyed stated that they expect GDP growth of less than one percent in Switzerland in 2025. Industrial companies were more pessimistic than service providers, which is not surprising given the weak foreign demand, according to the press release issued on Tuesday.

The companies' assessment of economic development is worse than that of UBS economists, who continue to expect GDP growth of 1.5 percent in 2025, adjusted for sporting events, and are now forecasting the same level of growth for 2026. According to UBS, the Swiss economy should return to trend growth, provided the expected acceleration in the eurozone does not fail to materialize.

The 400 or so Swiss companies surveyed by UBS consider geopolitical events to be the biggest uncertainty factor and driver of volatility. These include the economic policy of the new US President Donald Trump, the war in Ukraine and tensions in the Middle East. The economic environment and monetary policy were mentioned less frequently.

USD/CHF expected to fall below 0.90

The ongoing uncertainty will also be felt on the foreign exchange market. For example, respondents expect the franc to strengthen slightly against the euro. They expect the EUR/CHF exchange rate at the end of 2025 to be 0.92 francs, while UBS economists expect it to be 0.93 francs. The common currency is currently trading at 0.9388 francs.

With regard to the dollar, the survey participants expect a rate of 0.85 francs at the end of the year, while UBS economists expect 0.88 francs (currently: CHF 0.9150). The greater potential for interest rate cuts by the US Federal Reserve compared to the Swiss National Bank remains the driver for the exchange rate trend, they said. However, the appreciation of the franc is expected to be less pronounced than before Donald Trump's election victory.

According to UBS, the majority of respondents plan to hedge foreign currency risks in an environment characterized by geopolitics and interest rate cuts. In the latest survey, 46% stated this after 42% in the previous year. Export companies in particular are reportedly doing this more frequently.