2022 was one of the worst years for the finance industry. Global inflation skyrocketed after the COVID-19 pandemic-induced lockdowns and the Russian invasion of Ukraine. Major economies around the world witnessed record-high inflation numbers not seen in many decades. Despite its 29-year high inflation, the small European nation of Switzerland has thrived.
The Swiss inflation rate hit a 29-year high of 3.5% in 2022. While it is still high by Swiss standards, the double-digit rates of other countries like the United States (9.1%), the United Kingdom (11.1%), and the eurozone (10.6%) are significantly higher.
How did Switzerland beat high inflation rates?
Switzerland’s GDP per capita exceeds the levels of other developed nations like the U.S., Japan, and Germany. Hence, it is one of the richest nations in the world. In addition, the nation is home to some of the wealthiest people in the world, with a mean adult wealth of $696,604. Together with its high cost of living, the nation has a high concentration of affluent citizens.
According to the Economist Intelligence Unit, the Swiss towns of Zurich and Geneva remained among the top ten most expensive cities in the world last year. This is despite rising living expenses in other premium locations like Singapore and New York.
As a result, Swiss people often experience less impact from price increases. This is because they tend to spend a smaller percentage of their income on necessities like food and housing than on discretionary items.
A stable currency
A strong currency is another factor in Switzerland’s relative pricing stability and its fight against inflation. The national currency has been progressively increasing in value, equaling the euro in 2022. The Swiss franc remained stable throughout the turmoil in Europe, while several other currencies fell against a rising US dollar.
That’s largely because it serves as a “safe haven” currency. The Swiss National Bank can guarantee the stability of the Swiss franc during market volatility because of a sizable reserve of gold, bonds, and other financial assets.
A rich society and a stable national currency have likely been the two main factors that aided Switzerland in its fight against inflation. Other countries are not in a position to fight inflation the way the Swiss have, as most countries do not have such a large percentage of their citizens in the ultra-wealthy class.