How Switzerland beat high inflation; Why the Swiss economy is strong

Inflation is thrashing countries all around the world. But not Switzerland

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ZURICH– As numerous nations around the world fight stubbornly high inflation, the increase in costs has actually been far less remarkable in Switzerland, a little mountainous country in western Europe.

Inflation in Switzerland struck a 29- year high of 3.5% in2022 While still high by Swiss requirements, it is well listed below the double-digit rates of other sophisticated economies, like the U.S. (9.1%), the U.K. (111%) and the euro zone (106%).

“I think they feel it more abroad than here in Switzerland,” one buyer in Zurich informed CNBC last month. “My mom is residing in Germany, in Berlin, and she is informing me constantly [that] whatever ended up being so costly.”

What are the elements that assisted shelter Switzerland from widespread inflation? CNBC checks out.

Prices beginning with a high base

Switzerland is among the world’s most affluent nations, with a GDP per capita that overtakes that of other significant economies, like the U.S., Japan and Germany.

It is likewise house to a few of the wealthiest residents worldwide, with a mean wealth of $696,604 per grownup– and a high cost-of-living to match.

The Swiss cities of Zurich and Geneva held consistent amongst the world’s 10 most costly cities in 2015, according to the Economist Intelligence Unit, even as inflation rose living expenses in other expensive locations, such as Singapore and NewYork

The Swiss cities of Zurich and Geneva held consistent in a ranking of the world’s most costly cities in 2022.


As an outcome, Swiss residents are normally less affected by cost increases, as they tend to invest a lower percentage of their earnings on fundamentals such as food and lodging, versus on discretionary products.

“Because people are on average quite rich, the share of food in the overall budget of households is not as big as maybe in other countries,” Tobias Straumann, teacher of financial history at the University of Zurich, informed CNBC.

“We also have inequality, of course. But, from an international perspective, we have, I think, a very well-functioning social policy,” he included.

The stability of the Swiss franc

Another factor for Switzerland’s relative cost stability comes from the strong Swiss franc.

The nation’s currency has actually gradually enhanced, increasing in worth to reach parity versus the euro in2022 While numerous currencies plunged versus a valuing U.S. dollar, the Swiss franc held consistent in the middle of volatility in Europe.

That’s mostly due to its status as a “safe haven” currency or protective possession. The Swiss franc is greatly backed by big reserve of gold, bonds and monetary possessions, which assist the Swiss National Bank make sure the currency’s stability throughout times of volatility.

While numerous currencies plunged versus a valuing U.S. dollar in 2022, the Swiss franc held consistent in the middle of volatility in Europe.


That likewise advantages Switzerland, an economy greatly depending on worldwide trade.

Switzerland imports around $302 billion worth of items and services each year, most of which originate from surrounding EU nations. A more powerful Swiss franc supplies a reliable discount rate on those imports.

Switzerland on the other hand exports a near equivalent $305 billion yearly– mostly consisting of greater worth items and services, such as watches and pharmaceuticals, which are less vulnerable to cost changes than are low-margin, mass-produced products.

A resistant energy supply

Switzerland is likewise less exposed to a few of the external elements that pressed costs higher in 2022, such as Russia’s war inUkraine

Home to a mountainous topography and more than 1,500 lakes, Switzerland is less dependent on oil and gas imports than a few of its European next-door neighbors, with hydroelectricity playing a crucial function in its energy supply.

Swiss energy providers are likewise mostly openly owned, indicating that they are less exposed to severe market volatility through monetary safeguard, while going through more stringent prices policy.

An bird’s-eye view reveals the Vieux-Emosson dam and the Emosson dam, part of the Nant de Drance pumped storage electrical energy power plant above Finhaut, westernSwitzerland The nation has actually been leaning on its domestic hydropower production in the middle of a larger energy crisis in Europe provoked by Russia’s intrusion of Ukraine.

Fabrice Coffrini|Afp|Getty Images

At completion of 2022, energy costs in Switzerland increased at a rate of 16.2%– listed below the levels dealt with by significant peers like Germany (25%), the Netherlands (30%), the U.K. (523%) and Italy (647%). The nation’s energy regulator now anticipates costs to increase by an additional 27% in 2023, with the typical family energy costs topping 1,215 Swiss francs ($ 1,238).

Jean-Claude Huber, supervisor of Hotel Piz Buin Klosters in the east of Switzerland, stated that the standardization of long-lasting energy agreements has actually assisted shelter organizations like his from any significant cost increases this year.

The four-star hotel’s vibrant prices structure likewise indicates that Huber has actually had the ability to hand down cost walkings of around 5-10% to consumers without harming need.

“We can play with the rates much more than if you have fixed rates all the time, and that helps us a lot. I’m sure the costs will be higher than before, but the turnover should be higher as well,” Huber stated.

Price manages on items and services

Alongside energy, Switzerland likewise has strict controls on the cost of items and services, which likewise makes them less vulnerable to inflation-led changes.

Of the core items utilized to determine inflation in the euro zone, consisting of food, real estate and transportation, practically one 3rd (30%) undergo cost policy in Switzerland– more than in any other European nation.

The cost of items and services are securely controlled in Switzerland, making them less vulnerable to broader, market-driven changes


Swiss food costs increased at an annualized rate of 4.0% in December in 2015, compared to 11.9% in the U.S., 16.9% in the U.K., and 19.8% inGermany

High tariffs on particular farming imports likewise suggest that locally produced foods, such as milk and cheese, are preferentially priced and less affected by motions in worldwide grocery store. That, in turn, has actually assisted promote the nation’s economy.

“We try to buy as much as possible Swiss, but even regional,” Huber stated. “Long-term, you want to have a local industry working, functioning.”

Inflation to fall listed below 2% by 2024

That does not suggest that Swiss customers have actually been absolutely unsusceptible to current cost walkings. Locals who spoke with CNBC kept in mind a relative increase in the cost of rental lodging, along with because of some foodstuff.

“When you’re a tenant … I think that’s maybe a point which increases a bit,” one buyer informed CNBC.

The Swiss franc is greatly backed by big reserve of gold, bonds and monetary possessions, which assist the Swiss National Bank make sure the currency’s stability throughout times of volatility.

Bloomberg Creative Photos|Getty Images

However, the Swiss National Bank stated in December that it sees inflation being up to approximately 2.4% in 2023, prior to reaching 1.8% in 2024.

That would be available in under the bank’s 2% target. Still, economic experts stated that is not likely to injure the economy.

“Even if we have a kind of recessionary scenario, people are still coming in, and that, of course, stabilizes demand,” Straumann stated, describing the complimentary motion of individuals throughoutEurope “I expect the same thing for this year, 2023, and probably also for 2024.”

What other nations can gain from Switzerland

Switzerland’s distinct financial landscape is years in the making and challenging for a lot of nations to duplicate wholesale. Its currency exchange rate policy, for example, might not be mirrored by the broader euro zone, offered the diverse economies included.

However, Straumann stated that the nationalization of Swiss energy arrangement provided a crucial lesson to other nations, especially those countries in Europe that went through a broad shift to privatization and are now paying the cost.

“In the medium to short-term, that was a very good idea,” stated of the privatization of energy supply. “But it’s not very resilient and they are haunted by that now.”

“At the time, many people said the Swiss are too conservative,” he included. “But I’d say in retrospect it was a very good decision.”