* Swiss exports down 1.6 pct in real terms in Dec
* EU is biggest trading partner, trade with EU falls
* Watches buck trend, rise 21 pct in Dec
(Adds details on watch exports)
ZURICH, Feb 2 Exports from Switzerland
fell in December, hurt by turmoil in the euro zone which slashed
demand for Swiss goods and drove the franc currency to
unfavorably strong levels as investors looked for a safe place
to park their money.
Despite the central bank's move to cap the Swiss currency's
rise at 1.20 per euro, the franc remains almost 30 percent
stronger than it was before the financial crisis erupted in
2008, pushing up the price paid by foreign buyers for Swiss
goods such as chemicals and watches.
Economists have warned growth will slow considerably as
exports suffer, with some even expecting the economy to fall
Swiss exports fell by a real 1.6 percent in December to
15.630 billion Swiss francs, the Federal Customs Office said.
Exports to the European Union, Switzerland's biggest trading
partner, dropped 4.2 percent, as the debt crisis curbed demand.
"Over the next few months, the strong Swiss franc will
continue to weigh on export growth. As for demand from abroad,
it will depend on what happens in the euro zone," said Credit
Suisse economist Maxime Botteron.
Overall last year, exports rose only 2 percent, the report
showed, down from 7 percent in 2010 as companies cut prices to
take account of the strong franc in a bid to preserve volumes.
The bright spot in December was shipments of watches, which
rose 21 percent to 1.9 billion francs.
Buoyant Asian demand for pricey timepieces, as well as
Chinese tourists flocking to European boutiques, have so far
helped companies such as Richemont sail relatively
unscathed through the latest bout of economic turmoil.
But recent comments from some in the sector have suggested
this picture may be changing.
Watch shipments climbed 19.2 percent in 2011 from a year
earlier, the Federation of the Swiss Watch Industry said. Yet
even in this sector firms saw the franc straining sales prices.
Although the watch industry was the star performer among
sectors in 2011, the chemical industry suffered a decline, as
did precision instruments.
The tough exchange rate ate into margins at Swiss specialty
chemicals maker Clariant in 2011 and drugs industry
supplier Lonza saw its profit last year plunge by a
third due in part to the strong franc.
December's weak export figure is only the latest in a slew
of downbeat economic news, including the PMI reading for January
, painting a gloomy picture for the months ahead.
With the economic outlook somewhat dour, some politicians
have called on the SNB to target an even weaker Swiss franc to
shield the economy better by making the country's exports
Yet those calls have receded in recent weeks, following the
resignation of SNB Chairman Philipp Hildebrand. Moreover, at its
most recent policy review in December, the SNB toned down its
warnings about the risks of deflation, even though it does see
falling prices this year.
"At this point we expect the euro-Swiss floor to remain at
1.20 as the deflationary pressures don't justify a hike from the
SNB," Botteron said.
The Swiss National Bank expects growth of just 0.5 percent
this year. Some economists even forecast a mild recession in the
first half of 2012.
(Reporting by Catherine Bosley; editing by Anna Willard)