The economic context of Switzerland

Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

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 a positive first half of the year 2022, the Swiss economy had to face a deteriorating global outlook due to high energy prices and the uncertainty linked to Russia’s invasion of Ukraine (natural gas makes up 15% of Swiss energy consumption, of which half was imported from Russia prior to the war). For the year as a whole, the IMF estimated growth at 2.2% of GDP driven by the service sector: in particular, consumer spending has picked up substantially in leisure, hospitality and travel since the lifting of public health restrictions. For 2023, a weaker foreign demand is expected to slow trade and investment, as low consumer confidence should moderate consumption, resulting in an overall forecast growth of 0.8% (IMF). With the normalization of the global situation, the IMF expects the economy to resume growing at a faster pace in 2024 (+1.8% of GDP).

As the support measures taken to mitigate the impact of the COVID-19 pandemic were phased out during 2022, the total government budget deficit was estimated at 0.2% of GDP, also thanks to a rebound in tax revenue as companies in the financial and pharmaceutical sectors recorded strong performances. The budget is expected to return into positive territory over the forecast horizon, at +0.3% of GDP this year and +0.4% in 2024 (IMF). Similarly, the debt-to-GDP ratio – at 40.3% in 2022 – should follow a downward trend (39.1% in 2023, with a further decline to 37.5% in 2024). Despite the tense global situation, inflation in Switzerland remained modest by international standards: in 2022, headline inflation was estimated at 3.1%, and the Swiss National Bank opted for several interest rates hikes after seven years of negative rates. For 2023 and 2024, the IMF expects the inflation rate to return closer to the Central Bank’s 2% target (at 2.4% and 1.4%, respectively), 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 are required to share their clients' information with foreign tax authorities.

Following a strong first semester of 2022, employment growth recorded a slowdown in line with the economic conjuncture, with unemployment starting to edge up in the fourth quarter. The average annual unemployment rate was estimated at 2.2% for 2022, with a projected rise in 2023 (2.4% - IMF). Overall, Switzerland is one of the wealthiest countries in the world, with a GDP per capita (PPP) estimated at USD 84,469 in 2022 by the IMF. Nevertheless, according to the latest data available from the Federal Statistical Office, 8.5% of the Swiss population is affected by income poverty.

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 4.9 million people. Agriculture represents 0.6% of GDP and employs 3% 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 (7,670 organic farms, 15.7% of the total, according to the Federal Statistical Office), but with big cantonal differences. Official figures show that in 2022 Swiss agriculture generated a gross value added of CHF 4.3 billion, an increase of 1.6% compared with the previous year.

Industry employs 20% of the workforce and constitutes 24.6% 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 Q3/2022, the total output in the secondary sector increased by 3.4% year-on-year.

The service sector represents 71.9% of GDP and employs 77% 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. The banking sector alone represents 9.4% of gross value added and is in moderately good shape despite considerable headwinds. Almost half of the EUR 8,919 billion assets currently managed by Swiss banks originated abroad. The system comprises four major banks, 24 cantonal banks, 36 stock exchange banks, one Raiffeisenbank and 59 regional and savings banks, for a total of 239 banks with 2,451 branches (European Banking Federation). 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 during 2022 when the hotel sector recorded 22.4 million overnight stays during the summer season, 21.9% higher than the same period one year earlier.

 

Breakdown of Economic Activity By Sector	Agriculture	Industry	Services
Employment By Sector (in % of Total Employment)	2.6	20.3	77.1
Value Added (in % of GDP)	0.6	24.6	71.9
Value Added (Annual % Change)	-6.5	7.9	3.0

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

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

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

 

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