|Economy of Switzerland|
|Currency||Swiss Franc (CHF)|
|Fiscal year||Calendar year|
|Trade Organisations||OECD, WTO, EFTA|
|GDP Ranking (2008)||38th|
$329.9 PPP billion
|GDP growth rate (2008)||4.0% nominal
2.7% per capita nominal
0.5% per capita real
|GDP per Capita (2008)||CHF70,849
|GDP by sector (2008)||primary (1.2%)
|GDP structure (2008)||Private consumption (56.8%)
Public consumption (10.8%)
|Inflation rate||2009 -0.5%|
|Pop below poverty line (2005)||4.8 %|
|Employed Population(Q2 2009)||4.493mio|
|Employed Population by occupation Q2 2009)||primary (3.7%)
|Unemployment rate||2009 3.7%
2008 3.4%, Q3 2009 4.2%
|Main Industries||machinery, chemicals, watches, textiles, precision instruments|
|Total exports||2008 $282.1 billion (56.4% of GDP)|
|Main Partners (2008)||Germany 20.3%, US 9.4%, Italy 8.8%, France 8.6%, UK 4.7%, Spain 3.5%, Netherlands 3.0%|
|Total imports||2008 $226.2 billion (45.2% of GDP)|
|Main Partners (2008)||Germany 34.7%, Italy 11.4%, France 9,7%, US 5.1%, Netherlands 4.8%, Austria 4.2%, UK 3.2%,|
|Current account balance 2008||$12.0 billion (2.4% of GDP)|
|Public Finances |
|Total Public Debt (2008)||41.29% of GDP|
|Revenues (2008)||38.21% of GDP|
|Expenses (2008)||37.18% of GDP|
|Budget Balance (2008)||+1.03% of GDP|
|Economic Aid (ODA) (2008)||CHF2.21 billion (0.41% of GDP)|
The economy of Switzerland is one of the world's most stable economies. Its policy of long-term monetary security and bank secrecy has made Switzerland a safe haven for investors, creating an economy that is increasingly dependent on a steady tide of foreign investment. Because of the country's small size and high labour specialisation, industry and trade are the keys to Switzerland's economic livelihood. Switzerland has achieved one of the highest per capita incomes in the world with low unemployment rates and a low budget deficit. The service sector has also come to play a significant economic role.
As an effect of the industrial revolution which began in England at the beginning of the 19th century, Switzerland's agrarian sector decreased in size and thus the industrial sector started to increase in size from the mid 19th century on.
In the 1900s and by the beginning of the 20th century Switzerland's industrial sector was the largest and Switzerland was the wealthiest country in Europe by a considerable margin.
In the 1910s, during World War I, Switzerland suffered an economic crisis. It was marked by a decrease in energy consumption. (energy was mostly produced by coal in the 1910s, 1920s, 1930s and 1940s). The war tax was introduced. As imports were difficult, attempts were made to strengthen the Swiss economy. The cultivation of grain was promoted, and the Swiss railway became the first to use electric instead of coal-burning, steam-driven engines.
In the 1920s Switzerland's energy consumption increased.
Throughout the 1930s Switzerland's energy consumption stagnated.
In the 1940s, particularly during World War II the economy profited from the increased export and delivery of weapons to the German Reich. However, Switzerland's energy consumption decreased rapidly. The conduct of the banks cooperating with the Nazis and the commercial relations with the axis powers during the war became the subject of sharp criticism to such an extent, which even resulted in a short term international isolation of Switzerland from the world. After World War II, Switzerland's production facilities remained to a great extent undamaged which facilitated the country's swift economic resurgence.
In the 1950s, annual GDP growth averaged 5% and Switzerland's energy consumption doubled. Coal lost its rank the Switzerland's primary energy source, as other fossil fuels such as crude and refined oil and natural and refined gas imports increased. This decade also marked the transition from an industrial economy to a service economy. Since then the service sector has been growing faster than the agrarian and industrial sectors.
In the 1960s, annual GDP growth averaged 4% and Switzerland's energy consumption doubled. By the end of the decade oil was Switzerland's primary energy source.
In the 1970s GDP growth rates gradually declined from a peak of 6.5% in 1970 until contracting 7.5% in 1975 and 1976. Switzerland became increasingly dependent on oil imported from its main supplier, the OPEC cartel. The 1973 international oil crisis caused Switzerland's energy consumption to decrease from 1973 to 1977. In 1974 there were three nationwide car free Sundays when private transport was prohibited as a result of the oil supply shock. From 1977 onwards GDP grew, however Switzerland was also affected by the 1979 energy crisis which resulted in a short term decrease of Switzerland's energy consumption.
In the 1980s, Switzerland was affected by the hike in oil prices which resulted in a decrease of energy consumption until 1982 when the economy contracted by 1.3%. From 1983 on both GDP and energy consumption grew.
In the 1990s, Switzerland's economy was marred by slow growth, having the weakest economic growth in Western Europe. The economy was affected by a 3-year-recession from 1991 to 1993 when the economy contracted by 2%, also became apparent in Switzerland's energy consumption and export growth rates. Switzerland's economy averaged no appreciable increase (only 0.6% annually) in gross domestic product (GDP). After having unemployment rates lower than 1% prior to 1990, the 3-year-recession also caused the unemployment rate to rise to its all-time-peak of 5.3% in 1997. And thus, as of 2008, Switzerland is at the second place among European countries with populations above one million in terms of nominal and purchasing power parity Gross Domestic Product per capita, behind Norway (see list). On numerous occasions in the 1990s real wages decreased since nominal wages couldn't keep up with inflation. However, beginning in 1997, a global resurgence in currency movement provided the necessary stimulus to the Swiss economy. It slowly gained momentum and peaked in the year 2000 with 3.6% growth in real terms.
In the early 2000s recession, being so closely linked to the economies of Western Europe and the United States, Switzerland was not able to escape the slowdown felt in these countries. After the worldwide stock market crashes in the wake of the 9/11 terrorism attacks there were more announcements of false enterprise statistics and exaggerated managers' wages. In 2001 the rate of growth dropped to 1.2%, to 0.4 % in 2002 and in 2003 the real GDP contracted by 0.2%. That economic slowdown had a noticeable impact on the labour market. Many companies announced mass dismissals and thus the unemployment rate rose from its low of 1.9% in June 2000 to its peak of 3.9% in October 2004, although well below the European Union (EU) unemployment average of 8.9%. The consumer mood worsened and domestic consumption decreased. The exports of goods and services in the EU and the USA decreased as a result of the Swiss Franc's appreciation in value which caused an increase in prices of exported goods and services. On the other hand Switzerland's tourism sector slumped and room occupation rates by foreign guests decreased. Besides that a deficit of market competition in many branches of Switzerland's economy persisted.
On the 10.11.2002 the economics magazine Cash publicized 5 measures, which political and economic actors should implement, so that Switzerland would once again experience an economic revival:
1. Private consumption should be promoted with decent wage increases. In addition to that families with children should get discounts on their health insurances.
2. Switzerland's national bank should revive investments by lowering interest rates. Besides that monetary institutes should increasingly credit consumers and offer cheaper land zones which are to be built on.
3. Switzerland's national bank is asked to devalue the Swiss Franc, especially compared to the Euro.
4. The government should implement the anti-cyclical measure of increasing budget deficits. Government spending should increase in the infrastructural and educational sectors. Lowering taxes would make sense in order to promote private household consumption.
5. Flexible work schedules should be instituted, thus avoiding low demand dismissals.
These measures were applied with successful results along with the government's policy of the Magical Hexagon which consists of full employment, social equality, economic growth, environmental quality, positive trade balance and price stability. The rebound which started in mid 2003 saw growth rate growth rate averaging 3% (2004 and 2005 saw a GDP growth of 2.5% and 2.6% respectively; for 2006 and 2007, the rate was 3.6%). In 2008, GDP growth was modest in the first half of the year while declining in the last two quarters. Because of the base effect, real growth came to 1.8%. The stock market collapse has deeply affected investment income earned abroad. This has translated to a substantial fall in the surplus of the current account balance. In 2006, Switzerland recorded a 14.9% per GDP surplus. It went down to 9.9% in 2007 and further dropped to 2.4% in 2008. As of the second quarter 2009, Switzerland house prices are still edging up and are expected to stabilize, not decline.
This is a chart of trend of gross domestic product of Switzerland at market prices estimated by the International Monetary Fund with figures in millions of Swiss Francs.
|Year||Gross Domestic Product||US Dollar Exchange|
The Swiss economy follows the typical First World model with respect to the economic sectors. Only a small minority of the workers are involved in the Primary or Agricultural sector (3.8% of the population, in 2006) while a larger minority is involved in the Secondary or Manufacturing sector (23% in 2006). The majority of the working population are involved in the Tertiary or Services sector of the economy (73.2% in 2006). While most of the Swiss economic practices have been brought largely into conformity with the European Union's policies, some trade protectionism remains, particularly for the small agricultural sector.
Switzerland is extremely protective of its agricultural industry. High tariffs and extensive domestic subsidisations encourage domestic production, which currently produces about 60% of the food consumed in the country.
According to the Organisation for Economic Co-operation and Development (OECD), Switzerland is subsidizing more than 70% of its agriculture compared to 35% in the EU. The 2007 Agricultural Program, recently adopted by the Swiss Federal Assembly, will increase subsidies by CHF 63 million to CHF 14.092 billion.
Protectionism acts to promote domestic production, but not to
reduce prices or the cost of production, and there is no guarantee
the increased domestic production is actually consumed internally;
it may simply be being exported, to the profit of the
But 90 to 100% of potatoes, pork, veal, cattle and most milk products, are produced in the country. Beyond that, Swiss agriculture meets sixty-five per cent of the domestic food demand.
Prices are not reduced because, in the absence of import tariffs, the price of food would settle to that of the cheapest provider (which would often be external to Switzerland thus more costly in food miles). Import tariffs rise the price of food and Swiss domestic production only has to be cheaper than these artificially raised prices. The consumer pays more than they otherwise would.
The cost of production is not reduced by subsidy; it merely makes the final point-of-sale price lower than it would otherwise be, since some of the cost of production is born by the State. However, the State obtains the money for the subsidy by taxation, which falls ultimately on the consumer. Subsidy merely alters who pays for what (although in this case it now pays for farming practices that are environmentally respectful). Furthermore, if the food products produced are in fact being exported, the subsidy of their production costs makes them unusually competitive in the world market, which increases the profits of the producers; in other words, the State is in fact taxing the local population with an outcome which is actually merely to increase the profit of food producers.
The stringent policy of agricultural protectionism is generally harmful to the workforce. Domestic agriculture acts as a shield against beneficial import of labour. Some people assert that Switzerland has a high cost of living not only in food but also rents, since much land needed for human occupation is retained by farms, but this is easily countered by statistics. About 40% of Switzerland is used for agricultural purposes, alpine pastures included, and the surface of arable and permanent cropland is 10.6 percent of total land area (Europe 13.4%, world 11.3% - 1998 survey). This corresponds with 61 hectares of cropland per 1,000 people (Europe 422 ha/1000 people, world 251 ha/1000 people) Thus the high rents are probably caused primarily by other factors such as the high population density and the tiny size of the country.
The first reform in agricultural policies was in 1993. Among other changes, since 1998 Switzerland has linked the attribution of farm subsidies with the strict observance of good environmental practice. Before farmers can apply for subsidies, they must obtain certificates of environmental management systems (EMS) proving that they: “make a balanced use of fertilizers; use at least 7% of their farmland as ecological compensation areas; regularly rotate crops; adopt appropriate measures to protect animals and soil; make limited and targeted use of pesticides.” 1,500 farms are driven out of business each year. But the number of organic farms increased by 3.3 percent between 2003 and 2004, and organic sales increased by 7 percent to $979 million. Moreover, Swiss consumers consider less important the drawback of higher prices for organic food compared to locally produced, conventional food.
Apart from industry, trade has been the key to prosperity in Switzerland.
Switzerland has a highly developed tourism infrastructure, especially in the mountainous regions and cities, making it a good market for tourism-related equipment and services. Tourism contributes about SF 1.5 billion to the Swiss economy every year.
In 2003, the financial sector comprised an estimated 14% of Switzerland's GDP and employed approximately 180,000 people (110,000 of whom work in the banking sector); this represents about 5.6% of the total Swiss workforce.
Swiss neutrality and national sovereignty, long recognized by foreign nations, have fostered a stable environment in which the banking sector was able to develop and thrive. Switzerland has maintained neutrality through both World Wars, is not a member of the European Union, and was not even a member of the United Nations until 2002.
Currently an estimated one-third of all funds held outside the country of origin (sometimes called "offshore" funds) are kept in Switzerland. In 2001 Swiss banks managed US$ 2.6 trillion. The following year they handled US$400 billion less which has been attributed to both a bear market and stricter regulations on Swiss banking. By 2007 this figure has risen to roughly 6.7 trillion Swiss francs (US$5.7 trillion).
The Bank of International Settlements, an organization that facilitates cooperation among the world's central banks, is headquartered in the city of Basel. Founded in 1930, the BIS chose to locate in Switzerland because of the country's neutrality, which was important to an organization founded by countries that had been on both sides of World War I.
Foreign banks operating in Switzerland manage 870 billion Swiss francs worth of assets (as of May 2006).
The Swiss economy is characterised by a skilled and generally 'peaceful' workforce. One quarter of the country's full-time workers are unionised. Labour and management relations are amicable, characterised by a willingness to settle disputes instead of resorting to labour action. About 600 collective bargaining agreements exist today in Switzerland and are regularly renewed without major problems.
With the peak of the number of bankruptcies in 2003, however, the mood was pessimistic. Massive layoffs and dismissals by enterprises resulting from the global economic slowdown, major management scandals and different foreign investment attitudes have strained the traditional Swiss labour peace. Swiss trade unions have encouraged strikes against several companies, including Swiss International Air Lines, Coca-Cola, and Orange. Total days lost to strikes, however, remain among the lowest in the OECD.
Switzerland is among the world's most prosperous countries in terms of private income. In 2007 the gross median household income in Switzerland was an estimated 107,748 CHF, or USD 60,288 at purchasing power parity. The median income after social security, taxes and mandatory health insurance was 75,312 CHF, or USD 43,698 at purchasing power parity.
Through the United States-Swiss Joint Economic Commission (JEC), Switzerland has passed strict legislation covering anti-terrorism financing and the prevention of terrorist acts, marked by the implementation of several anti-money laundering procedures and the seizure of al-Qaeda accounts. Continued relationship with the United States through the JEC has brought the Swiss economy into closer proximity with that of the Western world, with mutualistic goals in terrorism prevention providing the impetus.
Apart from agriculture, there are minimal economic and trade barriers between the European Union and Switzerland. In the wake of the Swiss voters' rejection of the European Economic Area Agreement in 1992, the Swiss Government set its sights on negotiating bilateral economic agreements with the EU. Four years of negotiations culminated in Bilaterals, a cross-platform agreement covering seven sectors: research, public procurement, technical barriers to trade, agriculture, civil aviation, land transport, and the free movement of persons. Parliament officially endorsed the Bilaterals in 1999 and it was approved by general referendum in May 2000. The agreements, which were then ratified by the European Parliament and the legislatures of its member states, entered into force on June 1, 2002. The Swiss government has since embarked on a second round of negotiations, called the Bilaterals II, which will further strengthen the two organisations' economic ties.
Switzerland has since brought most of their practices into conformity with European Union policies and norms in order to maximise the country's international competitiveness. While most of the EU policies are not contentious, police and judicial cooperation to international law enforcement and the taxation of savings are controversial, mainly because of possible side effects on bank secrecy.
Swiss and EU finance ministers agreed in June 2003 that Swiss banks would levy a withholding tax on EU citizens' savings income. The tax would increase gradually to 35% by 2011, with 75% of the funds being transferred to the EU. Recent estimates value EU capital inflows to Switzerland to $8.3 billion.
Switzerland is a member of a number of international economic organizations, including the United Nations, the World Trade Organization, the International Monetary Fund, the World Bank, and the Organisation for Economic Co-operation and Development.
rate (males) %
rate (females) %
|Switzerland (2006) ||3.8||23||73.2||4||4.7||3.4||41.6|
|European Union-25 countries (2006)||4.7||27.4||67.9||8.2||9||7.6||40.5|
|United Kingdom (2006)||1.3||22||76.7||5.3||4.8||5.7||42.4|
|United States (2005)||1.6||20.6||77.8||5.1a||5.6 b||5.9 b||41c|