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The sudden increase of the Swiss franc last week, spurred by the Swiss National Bank’s decision to remove the currency’s cap against the euro, could cost the country’s exporters CHF5bn in the coming year, according to UBS.

This corresponds to around 0.7% of GDP, and will have a negative impact on the Swiss economy as a whole. Consequently, the Swiss bank has revised its GDP growth forecast downward to +0.5% for 2015 (previously at +1.8%).

Reactions were strong when the Swiss central bank made its surprise announcement last Thursday (January 15): the currency immediately climbed 14% from around 1.2 to the euro to around 1.0, while company heads expressed their shock.

“Words fail me,” Swatch CEO Nick Hayek told Bloomberg, describing the move as a “tsunami for the export industry”.

But according to UBS, the watch industry won’t be the hardest hit.

“We expect the exports of sectors with the highest price elasticity of demand, such as the chemical, machinery and metal industries, to be most affected. At the same time, we think that exports of the watch and pharmaceutical industries should be somewhat more resilient. Featuring a high income elasticity, the latter should benefit particularly strongly from an expected acceleration in growth in the eurozone in the second half of 2015,“ senior economists at the bank tell GTR.

Despite doing most of their business in US dollars, Geneva-based commodity traders will reportedly be affected by the currency’s increased valuation, as it is likely to increase day-to-day costs such as staff wages. Ultimately, the situation might make Singapore even more appealing as a base for these companies, which are already drawn to the Asian city’s attractive tax rates.

UBS economists also believe the profits of banks financing exports from the country will be affected: “As a majority of costs are incurred in Swiss francs but most earnings are made in other currencies, we expect a one-to-one impact on profits of the banking sector as a whole.”

Five days after the de-capping, the Swiss currency had stabilised at around parity with the euro, and economic forecasters believe it will remain at this level for at least 12 months.