EXPLAINED: The benefits (and challenges) of the strong Swiss franc

The Swiss franc has been trading near a record against the euro in recent days due to the crisis in the Middle East and it is now slowly approaching an all-time high.

Last Friday, the Swiss franc’s exchange rate against the euro dropped to 0.9457 - a low point it had not reached since September 2022, and for now, it is uncertain how long this will remain the case.

Paradoxically, geo-political upheavals, such as Russia’s invasion of Ukraine, are the major reason for this phenomenon and once again, foreign investors view Switzerland as a safe haven in a turbulent world.

Its stable economy is also a plus, while the low national debt and the current account surplus are also contributory factors in the strength of the franc. 

But while the strong Swiss franc poses issues on some fronts, such as making travel to Switzerland more expensive for overseas tourists, some positive developments - for Swiss residents - have emerged as well.

READ MORE: How the strong Swiss franc has been a boost for Switzerland

First, the pros…

Cheaper travel abroad

The strong Swiss franc is good news for those who earn their keep in Switzerland but wish to travel abroad. At present, you will be able to visit multiple European destinations for less money.

This applies to the most popular holiday destinations such as Italy, France, Portugal, and Spain, among others. In those countries, you will spend less on accommodations, food, entertainment, and other expenditures than people living in the eurozone.

Small tip: If you are looking to book a holiday in Europe, make sure to keep track of prices on the various websites to see whether they have already applied the new exchange rate. Sometimes it also helps to book your vacation on a website where prices are quoted in euros or alternatively, book directly with the hotel to be sure you're getting your money's worth.

Cross-border shopping saves money

For years, many people living near one of Switzerland’s borders do some of their monthly shopping in neighbouring countries to save money and right now, a trip across the border to Germany or France will certainly pay off.

For many Switzerland-based residents, shopping in eurozone countries make sense financially even in regular circumstances given that many products are usually priced cheaper abroad and you're able to reclaim value-added tax on your shopping.

However, with the Swiss franc being particularly strong against the euro at the moment, you will be able to save even more of your money if you take your shopping across the border.

Shopping across the border in Germany can be better value. Photo: 12019 from Pixabay

While you can also do some of your international shopping online (which can be a valid option), it is important to remember that the delivery cost and customs duties may be so high you will essentially pay more than you would at a Swiss shop.

Though these shopping practices may end up saving you quite a bit of money, it is of course not a great long-term strategy for the Swiss economy which suffers when those earning in Switzerland take their money overseas.

In fact, Swiss shopping tourists spend around 7 billion francs a year in stores abroad.

READ MORE: Why cross-border shopping has become less popular in Switzerland

Import companies benefit

Switzerland-based companies that source their goods and services from overseas will be able to benefit from the strong Swiss franc and make more money.

In 2022, Switzerland’s foreign import trade amounted to 341 billion Swiss francs with over half of the imports coming from other countries in Europe, such as Germany, Italy, France, and Austria.

Though this may mean that import-oriented companies in Switzerland profit from the strong Swiss franc, this doesn’t necessarily mean that consumers will too as the companies can keep their profits to themselves if they wish (and many do).

Unfortunately, this means that you could still be paying the same price you would if the Swiss franc was in fact weaker.

Now onto the bad…

Companies focused on export trade face challenges

While the strong Swiss franc spells good news for Switzerland-based corporations that primarily focus on importing products, the current franc-to-euro parity does not benefit those companies that are export-based.

Some Swiss companies may opt to increase the price of their export goods to make up for the lost money which in turn means that the product itself would be more expensive for customers abroad to purchase. This could of course also result in less business due to a lack of competitiveness in terms of pricing.

Last year, Switzerland’s foreign export trade amounted to 383 billion Swiss francs, which included manufactured goods – such as its popular watches and machine products - being sold to customers in the United States, Germany, China, and other European countries.

Fewer tourists travel to Switzerland

The strong Swiss franc may very well enable Switzerland-based earners to enjoy numerous stays abroad, but it also makes holidays in Switzerland very pricy for overseas tourists. This in turn has a negative effect on the Swiss economy.

However, unlike many other industries, the tourist industry has no way of outsourcing its business and does not enjoy the same import profits as other industries might, which means that the strong Swiss franc brings next to no benefits for the industry.