Switzerland is viewed by many as being a wealthy country and given that GDP per capita stood at US$102’866 in 2023 (ranked 3rd globally), it is easy to understand why. However, sharp increases in the cost of living in recent years, have caused some families to reconsider priorities before spending.

So is this the end of the good life in Switzerland as we know it? Or is this just a temporary phase? In this post, we look at some of the current data available and consider forecasts for the next period.

 

Inflation

Switzerland’s average official inflation rate from 1960 to 2022 stood at a relatively low 2.4% per year. Switzerland is often referred to as the land that inflation forgot. However, like every country there are “unavoidable living costs”  such as healthcare, which continue to rise and which are not considered in the consumer price index basket of goods.

Some other fixed costs hard to circumnavigate are:

  • Rental for living accommodation:
    • In 2021, 61% of households in Switzerland lived in rented or cooperative dwellings. In the urban cantons of Basel-Stadt and Geneva, the percentage of families renting was much higher at 83% and 78% respectively.
    • According to the Homegate rent index, compiled jointly with the ZKB bank, rents rose by 4.7% overall in 2023. This is above the average rate of inflation.
  • Health Insurance: these rose sharply by 8.7% in 2023/4. And this is not the first time we have seen high price increases for healthcare insurance and some critics even describe the private healthcare system in Switzerland as being broken.

With the dream of a prosperous life in Switzerland fading for some, the danger could be that the current inflationary period may continue to reduce the expendable income of some individuals and families going forward. And with the baby boomer generation also now retiring, the situation could spread further.

 

 

 

Silver Lining

But despite the naysayers, there is still plenty of good news coming out of Switzerland and plenty of reasons to be positive. Here is our top 5 list of reasons to be positive.

  • Switzerland ranks 1st on the 2021 Global Innovation Index.
  • Switzerland ranks 7th out of 180 countries in the Environmental Performance Index (2020).
  • Switzerland ranks 3rd in the 2021 World Happiness Report.
  • Switzerland ranks 2nd out of 28 countries in the 2020 Global Health Security Index.
  • Switzerland has the 2nd highest annual Time Use Score for leisure and personal care (2019).

When we take a look at the latest economic figures and trends, Switzerland also looks positive.

  • The inflation rate continues to fall and latest figures show inflation running at 1% (March 24 / 1.2% previous month)Investing in Switzerland.
  • Food inflation, one of the areas of discourse, is also seeing a drop recently and is now down 0.4 vs previous month as measured in March24
  • Other indicators such as government debt to GDP ratio, business confidence, personal income tax rate remain stable and offer investors a solid platform in which to invest.
  • Home ownership rates are also increasing – up slightly versus previous month with property prices become slight more affordable during the same period.

Summary

Switzerland has a reputation of being safe and clean and coupled with stunning scenery it can be a great place to invest, with a stable economy and strong business culture. Since the Global Pandemic, we have seen inflation across the globe and with supply chains suffering due to geo-political events, Switzerland has also not escaped unscathed.  However, the signs are positive that Switzerland will continue to thrive and prosper.

Economic indicators for Switzerland show a relatively healthy picture. A recent IMF report  paints a slightly cautious  picture however with “The outlook for the Swiss economy remaining high, but success to a large extent depending on global economic developments and the energy situation”.  

Only time will tell how the outlook will actually materialise for Switzerland, but with job vacancies high,  unemployment low and prices now stable, the clouds that darkened the economy do now have a very notable silver lining to them.

 

Swissroll GmbH was founded over 20 years ago. During this time our team of experts has worked with hundreds of companies and literally thousands of contractors. Also cross border workers. Beyond our core function of payroll management, we offer advice to workers about which engagement model best suits theirs, and the clients needs. This includes giving advice in French, German and English and on social security, tax as well as working remotely and what to do in the case of mental health challenges. Call or contact us now on: enquiries@swissroll.ch