Switzerland may face first recession in six years. Thanks, franc!

The data is due on Friday, and many analysts now expect gross domestic product to have shrunk 0.1 percent in last quarter, a second consecutive contraction that would mark the first recession in six years.

Seven months after the central bank removed its currency cap, Switzerland is dealing with declining exports, stagnant manufacturing and plunging prices.

The local currency has appreciated 11 percent against the euro since the central bank’s unexpected January 15 decision to opt for a free float. 

The central bank also cut its deposit rate to a record low of minus 0.75 percent and pledged currency interventions as needed. Its next rate decision is on Sept. 17, and Jordan said that a policy change isn’t imminent.

For SNB President Thomas Jordan, who has defended the decision, the weaker near-term backdrop will match his assessment when policy-makers gather in three weeks for their quarterly policy meeting.

In an interview with UnternehmerZeitung last week, Jordan said that the current monetary policy is taking today's difficult situation into account. “We expect the economy to return to a growth path in the second half of the year.”

A number of economists also consider that the fall may be short-lived, predicting growth of 0.1 percent this quarter and 0.2 percent in the last three months of the year.

Although growth is expected to resume, surveys indicate a subdued recovery. A manufacturing index has signaled contracted almost every month this year and consumer confidence dipped to its lowest in more than three years in July.

The slowdown in China could hamper economic momentum, as global demand will become unpredictable, analysts say.

In July exports of watches to eight leading Asian markets dipped, with China tumbling almost 40 percent. Overall exports to China dropped 1.7 percent last month. Shipments to the euro area in the first half, which account for 44 percent of sales abroad, fell 8 percent.

Swiss companies have been looking to Asia to offset weakness in Europe, with Switzerland clinching a free-trade agreement with the world’s second-largest economy last year, Bloomberg reports.