How is inflation faring in Switzerland?

The geopolitical crises have had an adverse effect on the economic environment in many countries. In Europe, inflation is a constant concern for governments and seems difficult to manage. In Switzerland, even if the country has not reached the high inflation levels of its European neighbours in 2022, the state of health of the local economy is not yet reassuring economic players.

Global data has shown that over the past 62 years, Switzerland has remained within a range of 2.4% per annum for the average rate of inflation. Analysis of recent data also shows that inflation is likely to persist in the years ahead, in this case until 2024. In this article, we will analyse changes in the inflation rate in the Swiss economy and draw some conclusions.

1. A period of stability before Covid-19 and the Russian-Ukrainian conflict

Before the crisis triggered by Covid-19 and then by the Russian invasion of Ukraine, the Swiss economy was renowned for its stability. In cities and cantons such as Geneva, Lausanne, Vaud and French-speaking Switzerland, inflation in consumer goods was relatively low.

A number of data studies have shown that Switzerland is a country whose economy remains more or less stable and flourishing compared with other neighbouring countries. Calculating the average inflation rate from 1960 to 2022 shows that the inflation rate for consumer goods in Switzerland has fluctuated between -1.1% and 9.8%. The average over these 62 years shows an average inflation rate of 2.4% per year.

But in 2022, this average will rise, probably as a result of the crises linked to the health pandemic and the Russian invasion of Ukraine.

2. The rise in the inflation rate from 2022 onwards

The rise in the inflation rate in Switzerland coincides with the Russian-Ukrainian conflict in 2022. Inflation was calculated at 2.8%. Since then, there have been a number of variations. Economists explain this variation by the fact that the Swiss monetary zone and two others, namely the eurozone and the United States, are experiencing the same problem of central banks raising interest rates because inflation is too high.

Covid-19 and geopolitical crises are largely responsible for the economic situation and its impact on the Swiss inflation rate. Local attempts to maintain or lower the inflation rate in 2022 have not really borne fruit over the long term. Since then, a number of figures that predicted an increase in the following years are still valid.

3. Rising inflation in the early months of 2023

From an inflation rate of 2.8% in 2022, the Swiss economy hit a rough patch at the start of 2023, with inflation rising to 3.4%. Over the course of a year, the rate had risen considerably. In February 2023, inflation was calculated at 3.4%, compared with 3.3% in January of the same year.

This increase was justified by the higher cost of products manufactured in Switzerland and the problem of air transport. Announced by the Federal Statistical Office (FSO) in March 2023, this figure has worried a number of investors and economic players. With the rise in petroleum products, the prices of imported products in Vaud, Lausanne, French-speaking Switzerland and throughout Switzerland rose by 4.9% over the year. At the same time, local products also rose by 2.9%.

Between January and February 2023, the inflation rate had clearly risen. In fact, in January the rise in prices of imported products was still 5.2% year-on-year. In its March 2023 press release, the FSO announced a monthly increase of 0.7% in these prices compared with January.

4. Falling inflation in March 2023

After the first two months of the year with an inflation rate of 3.4%, a fall was recorded a few weeks later. The month of March 2023 recorded a drop to 2.9% as calculated inflation. The FSO's April 2023 release reported a deceleration in prices for both imported and domestic products.

Inflation in the prices of imported products had decelerated to 3.8% and that of local products had fallen slightly to 2.7%. This fall in inflation restored the confidence of a number of economic players with interests in the country. However, a number of figures and new statistics show that inflation is set to fall, but is likely to persist.

5. Inflation at the heart of 2024 concerns in Switzerland

Despite stable prices for local and imported products, inflation remains a concern in Swiss cities. At the same time, several economists are anticipating that this concern will remain at the heart of major discussions in the months ahead. Some are predicting that inflation will persist into 2024.

A survey of economists conducted by the KOF Institute for Economic Research has revealed that inflation will be 1.6% in 2024. This would be an increase of 0.3% on the previous figures surveyed in March.

At the same time, the experts announced that the unemployment rate would be between 2.1% in 2023, 2.2% in 2024 and 2.3% in 2028. Gross domestic product (GDP), according to the experts surveyed, will be between 0.8% in 2023, 1.6% in 2024 and 1.6% in 2028. All these figures come from the results and analyses of the experts surveyed. Taken together, these figures provide information on the overall state of inflation and its variations over the coming months.