February 3, 2011 / 10:03 AM / 7 years ago

Swiss exports hold up in Dec despite record franc

* Swiss exports rise 10.9 pct y/y in real terms in Dec

* Demand from Asian countries remains strong

* Economists expect high franc to slow growth in 2011

ZURICH, Feb 3 (Reuters) - Switzerland's exporters defied the record-strength of the Swiss franc in December for another month as Asian and Latin American countries bought more Swiss products, data showed on Thursday.

However, economists said the strong franc was eating into companies' margins and was set to slow export growth in the months ahead.

Swiss exports rose by nearly 11 percent in real terms compared to December 2009 and increased by 4.2 percent when also adjusted for seasonal factors compared to November, the Federal Customs Office said.

Exports to Asia rose more than 17 percent in nominal terms, demand from Latin American countries was up nearly 15 percent. But sales to countries in the European Union -- Switzerland's main trading partner -- increased only 2.8 percent.

"Exports to Asia are the main driver. Despite the franc's strength the export industry recovered last year," said Credit Suisse analyst Fabian Heller.

The franc has risen some 15 percent against the euro and around 10 percent against the dollar last year, hitting record highs against both currencies at the end of 2010.

The Swiss National Bank expects economic growth to slow to around 1.5 percent this year from some 2.5 percent in 2010 because of the strong franc.

The central bank is also widely expected to hold its target for the 3-month Swiss franc LIBOR at ultra-low levels as long as the franc remains strong, despite an economy operating at close to its non-inflationary capacity.

Most economists expect the franc will eventually ease, opening the way for a first post-crisis interest rate hike in December.<0#FES:>

"Rate hikes are not a question of growth at the moment, but depend on the franc," Sarasin analyst Alessandro Bee said. "Capacity utilisation is back at normal, from that perspective rates are too low. But the SNB will wait until the franc weakens."

SNB chairman Philipp Hildebrand has said the economy had a solid start to 2011 but also cautioned that the franc would impact the economy with a delay.

"Export growth will come under pressure," Bee said, pointing to underperformance of the Swiss economy compared to Germany as evidence that the strong franc was taking its toll.

"If the economy in Germany slows, such a strong franc will become critical," he said.

Many companies releasing 2010 results over the last couple of weeks have already reported a hit from the franc. Dairy group Emmi(EMMN.S) said on Thursday, currency strength shaved off nearly 5 percentage points off its sales growth abroad.

Swiss watchmakers meanwhile continued to benefit from the booming Asian economies. Watch exports rose nearly a quarter on the year in December, making 2010 the second-best year on record for the industry.

Reporting by Sven Egenter; editing by Patrick Graham

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