The Swiss Franc being very strong, it can amortize part of the cost of imports, which constitute the bulk of local consumption.
When most central banks tighten monetary policy in an attempt to stem persistent inflation, Switzerland faces very moderate price increases. For 2021, it was limited to 0.6%, according to statements from the Federal Statistical Office (FSO), published on Tuesday.
This figure follows a 0.7% price contraction in 2020. This deflationary trend was reversed in the spring of 2021, with a gradual rise in prices reflecting rising energy and transportation costs and shortages. of components which enamelled the recovery throughout the year.
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The inflationary surge was however contained in the Swiss Confederation compared to the phenomenon observed in the United States (6.8% in November), Great Britain (5.1%) or in the euro zone (4.9%) .
What explains this Swiss exception? The global price catching up is offset by the strength of the Swiss franc, which acts as a shield protecting local purchasing power. The strength of the currency absorbs part of the costs of imports, which constitute the bulk of local consumption. The increase in the prices of imported products was limited to 1.5%, while that of products manufactured in Switzerland reached only 0.3% over the year.
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The price index was pulled up by the increase in petroleum products and rents. But Switzerland benefits from an energy mix that mitigates the surge in world prices. Gas only represents 10% and renewables account for 60% of consumption.
“An already expensive economy“
In addition, recalls Samy Chaar, chief economist of the Swiss bank Lombard Odier, the country “Is an already expensive economy, with high wages, where companies’ room for maneuver to increase prices is limited and where there is no catch-up effect”.
This particular situation is a headache for the Swiss National Bank (SNB). The first in the world to initiate negative key rates in 2015, it is maintaining its ultra-accommodative monetary policy. It is out of the question to raise its interest rate by – 0.75%. Even if it has resigned itself to revising its inflation forecast for this year to 1%, it is still far from its target of 2%.
The Swiss economy has however largely recovered from the Covid crisis, its GDP having already returned to its pre-pandemic level. After 3.3% in 2021, growth should reach 3% this year, according to forecasts by the Swiss Secretary of State for the Economy. However, the uncertainty over the health situation and supply difficulties may weigh on the recovery for a few months, he warns.