Switzerland flag Switzerland: Economic and Political Overview

The economic context of Switzerland

Economic Indicators

For centuries Switzerland has adhered to a policy of armed neutrality in global affairs, which has given it the access and political stability to become one of the world's wealthiest countries, with an efficient market economy. Its standard of living, industrial productivity and quality of education and healthcare systems are among the highest in Europe. The Swiss economy was relatively resilient throughout the pandemic, thanks to its specialisation in the financial sector and in the chemical and pharmaceutical industries. After growing 2.7% the previous year, the country’s GDP recorded a modest increase of 0.9% in 2023 as the tight monetary policy adopted to fight inflation curbed investment spending. Moreover, manufacturing production was affected by sluggish demand from trading partners, impacting exports, whereas household consumption remained relatively strong. Real GDP is projected to grow by 1.8% in 2024 and 1.2% in 2025 (IMF), as consumption growth is likely to be hampered by weakened household purchasing power. A rise in rent, correlated with the increasing mortgage reference rate, and elevated electricity prices in the domestic retail market at the start of 2024 are poised to drive up consumer prices.

The public accounts registered a tiny surplus in 2023 (+0.1% of GDP). Despite a notable increase in tax revenues and a reduction in expenses related to the integration of Ukrainian refugees, the public budget surplus was constrained by the outlay on the public transportation system and a subsidy for public employees to counteract inflation. In 2024, there is an expectation that the measures aimed at mitigating inflation's impact on households will be eased, potentially resulting in a larger surplus (0.4% as per the IMF projections). Meanwhile, the debt-to-GDP ratio decreased to 39.5% in 2023 (from 40.9% one year earlier) and is expected to follow a downward trend over the forecast horizon (37.7% this year, with a further decline to 36.4% in 2025). Despite the tense global situation, inflation in Switzerland remained modest by international standards: in 2023, headline inflation was estimated at 2.2%, partially pushed by rises in rents and electricity prices. Monetary policy should remain tight to ensure that inflationary pressures subside. The IMF forecasts inflation at 2% this year and 1.7% in 2025, reaching the Central Bank’s 2% target, although the challenging international environment is likely to exert increasing pressure on the more cyclical segments of export-oriented industries. Switzerland remains high atop the list of preferred tax havens due to its low taxation of foreign corporations and individuals. The flow of overseas wealth to the country has come in for much criticism in past years, due to concerns over tax evasion. However, after signing an agreement on the automatic exchange of information with the European Union, Switzerland put an end to bank secrecy. Since then, Swiss banks have been required to share their clients' information with foreign tax authorities.

Unemployment remained low in 2023 - at 2.2% - and should be stable in the near term. Boosting participation in the labour market, particularly among mothers and older workers, would help reduce labour shortages. Overall, Switzerland is one of the wealthiest countries in the world, with a GDP per capita (PPP) estimated at USD 89,537 in 2023 by the IMF. Nevertheless, according to the latest data available from the Federal Statistical Office, 8.7% of the Swiss population is affected by income poverty.

 
Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 818.47905.68977.951,025.311,083.07
GDP (Constant Prices, Annual % Change) 2.70.91.81.21.8
GDP per Capita (USD) 93,657102,866110,246114,725120,285
General Government Balance (in % of GDP) 0.80.10.40.30.2
General Government Gross Debt (in % of GDP) 40.939.537.736.435.0
Inflation Rate (%) n/a2.22.01.71.5
Unemployment Rate (% of the Labour Force) 2.22.12.32.42.4
Current Account (billions USD) 83.4672.5578.4278.4286.67
Current Account (in % of GDP) 10.28.08.07.68.0

Source: IMF – World Economic Outlook Database, October 2021

Main Sectors of Industry

Switzerland is one of the most competitive economies in the world due to its strong added value services, its specialized industries and a motivated and highly skilled workforce of 5 million people. Agriculture only represents 0.6% of GDP and employs 2% of the active population (World Bank, latest data available). The primary agricultural products are livestock and dairy products, though the country is also home to over 9,000 wineries. Swiss authorities grant numerous direct subsidies to farmers in order to meet strict ecological criteria, such as soil protection. The country has hardly any mineral resources. Despite the small size of the agricultural industry, organic farming has experienced considerable growth (7,819 organic farms, 18% of the total, according to the Federal Statistical Office), but with big cantonal differences. Official figures show that in 2023 Swiss agriculture generated a gross value added of CHF 4.5 billion, an increase of 4.2% compared with the previous year.

Industry employs 20% of the workforce and constitutes 24.9% of GDP. Switzerland is renowned worldwide for the high quality of its manufactured products, which include watches, motors, generators, turbines and diverse high-technology products. The manufacturing sector alone is estimated to contribute 18% of GDP. The strong industry sector is driven by large exporting groups. Basel, in particular, is home to a very dynamic and powerful chemical and pharmaceutical industry. Electricity is generated chiefly from hydraulic and nuclear power, and hydroelectric resources provide almost two-thirds of the country's energy. Data by the Federal Statistical Office show that as of Q3/2023, the total output in the secondary sector increased by 1.6% year-on-year, while turnover grew by 4.5%.

The service sector represents 71.8% of GDP and employs 78% of the workforce. Well-developed and globally competitive sectors, such as banking, insurance, freight and transport, have contributed to the development of international trade across Switzerland. Insurance firms and banks play a vital role in the Swiss economy, contributing roughly 9% to the GDP. In 2022, the financial sector added approximately CHF 69 billion in value and supported a workforce of about 218,000 full-time equivalent employees. There are 235 banks in Switzerland. In 2022, UBS and Credit Suisse contributed 40% to the combined annual net turnover of Swiss banks. By 2023, UBS had acquired Credit Suisse. The remaining 60% of turnover primarily came from various sources, including the 24 cantonal banks, international banks, Raiffeisen banks, stock exchange banks, regional banks, savings banks, and private banks. Tourism, which adds significantly to the economy, helps to balance Switzerland's trade deficit: after being severely impacted by the COVID-19 pandemic, the sector recovered in 2022 and in 2023, with the hotel sector recording 23.9 million overnight stays during the summer season, the highest level ever observed (+6.3% y-o-y – data Federal Statistical Office).

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 2.2 19.9 77.9
Value Added (in % of GDP) 0.6 24.2 72.4
Value Added (Annual % Change) 8.2 2.3 2.0

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.

 

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Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

Score:
81,9/100
World Rank:
4
Regional Rank:
1


 

Business environment ranking

Definition:

The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

Score:
8.08/10
World Rank:
8/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024

 

Country Risk

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Sources of General Economic Information

Ministries
List of departments
Federal Department of Finance (FDF)
Federal Department of Environment, Transport, Energy and Communications (DETEC)
Federal Department of Home Affairs (FDHA)
Statistical Office
Federal Statistical Office
Central Bank
Swiss National Bank (SNB)
Stock Exchange
Switzerland Stock Exchange (SIX Swiss Exchange)
Economic Portals
 

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Latest Update: February 2024