Switzerland is a remarkable country in many ways. Being a small mountainous nation in western Europe, it has been able to mitigate the energy crisis as well as become one of the few countries that defeated inflation last year. Notably, Switzerland is one of the wealthiest countries in the world. It managed to keep consumer prices at a low level despite soaring inflation in Europe triggered by the energy crisis. Analysts explain this phenomenon by a strong Swiss franc and competent and prompt actions of local authorities, including the central bank.
Inflation in Switzerland hit 3.5% in 2022. While still high by Swiss standards, it is below the double-digit rates of other large economies, like the US (9.1%), the UK (11.1%), and the eurozone (10.6%). Economists came to the conclusion that Switzerland declared victory over inflation thanks to a strong national currency, strict control over goods and services prices, a high GDP per capita, and consumer confidence. Swiss citizens are less impacted by price rises as they tend to spend a lower proportion of their income on essentials such as food and accommodation.
Another reason for Switzerland’s price stability is the strong Swiss franc. It has been steadily climbing for some time, reaching parity against the euro in 2022. That is largely thanks to its status as a safe haven currency. Apart from that, Switzerland is less dependent on oil and gas imports than some of the European countries. Switzerland mainly relies on hydroelectric power. At the end of 2022, energy prices in Switzerland climbed by 16.2%, below the levels faced by its neighbors like Germany (25%), the Netherlands (30%), the UK (52.3%), and Italy (64.7%).
The Swiss National Bank expects inflation to fall to an average of 2.4% in 2023 and to 1.8% in 2024.
