During 2022, Switzerland showed a moderate annual inflation rate, coming in at 2.8%, significantly lower than the 9.2% seen in the EU.
In the context of current global inflation, Switzerland emerges as a surprising exception, resisting the inflationary pressures that are affecting many nations around the world. Despite the high costs of food in the Alpine country, its economy appears to be remarkably immune to price escalation. But what is the secret behind this Swiss resistance?
1. Cost structure
Swiss prices, which include wages and logistics costs, act as a protective barrier against global price fluctuations. In Switzerland, where a significant share of the retail price covers logistics, storage, and wages, the impact of price fluctuations is relatively small compared to other nationsi. This is attributable to the fact that, generally, price levels in Switzerland are higher, attenuating the effects of changes in the prices of basic goods.
2. Price regulation
Government price regulation is another key factor in Switzerland’s resistance to food price inflation. More than 25% of consumer goods in the basket used to calculate inflation are subject to price regulation. This level of price control, the highest in Europe, means that the cost of many items is not completely determined by simple market supply and demand.
3. Dynamic import duties
Switzerland operates a dynamic import tariff system, closely linked to national production levels. This strategy is of particular importance for agricultural imports, helping to stabilize global market prices. In times of plenty, high tariffs are imposed to protect against price fluctuations; conversely, when global prices rise, tariffs are revised downwards.
4. Energy efficiency in agriculture
The way Switzerland manages energy consumption in agriculture has a direct impact on food costs. With energy playing a crucial role from cultivation to transportation and processing, Switzerland maintains a significantly lower share of energy consumption in agriculture than the OECD average. The unique structure of the Swiss energy market, characterized by electricity suppliers that produce in-house or purchase at low cost through long-term agreements, helps keep energy prices stable.
All this had a direct impact on prices.
During 2022, Switzerland showed a moderate annual inflation rate, coming in at 2.8%, a figure significantly lower than the 9.2% found in the European Union. The latter represents the highest value ever recorded, even triple compared to the 2021 inflation rate.
In Switzerland, over the same period, there was an average increase of 4% in costs related to food and non-alcoholic drinks, while in the European Union this increase was 11.9%.
Original article published on Money.it Italy 2023-12-21 07:00:00. Original title: Ecco come la Svizzera riesce a contenere l’inflazione
