Economic and Political Overview

flag Switzerland Switzerland: Economic and Political Overview

In this page: Economic Outline | Political Outline

 

Economic Outline

Economic Overview

For centuries Switzerland has adhered to a policy of armed neutrality in global affairs, which has given it the access and political stability to become one of the world's wealthiest countries, with an efficient market economy. Its standard of living, industrial productivity and quality of education and healthcare systems are among the highest in Europe. The Swiss economy was relatively resilient throughout the pandemic, thanks to its specialisation in the financial sector and in the chemical and pharmaceutical industries. After growing 2.7% the previous year, the country’s GDP recorded a modest increase of 0.9% in 2023 as the tight monetary policy adopted to fight inflation curbed investment spending. Moreover, manufacturing production was affected by sluggish demand from trading partners, impacting exports, whereas household consumption remained relatively strong. Real GDP is projected to grow by 1.8% in 2024 and 1.2% in 2025 (IMF), as consumption growth is likely to be hampered by weakened household purchasing power. A rise in rent, correlated with the increasing mortgage reference rate, and elevated electricity prices in the domestic retail market at the start of 2024 are poised to drive up consumer prices.

The public accounts registered a tiny surplus in 2023 (+0.1% of GDP). Despite a notable increase in tax revenues and a reduction in expenses related to the integration of Ukrainian refugees, the public budget surplus was constrained by the outlay on the public transportation system and a subsidy for public employees to counteract inflation. In 2024, there is an expectation that the measures aimed at mitigating inflation's impact on households will be eased, potentially resulting in a larger surplus (0.4% as per the IMF projections). Meanwhile, the debt-to-GDP ratio decreased to 39.5% in 2023 (from 40.9% one year earlier) and is expected to follow a downward trend over the forecast horizon (37.7% this year, with a further decline to 36.4% in 2025). Despite the tense global situation, inflation in Switzerland remained modest by international standards: in 2023, headline inflation was estimated at 2.2%, partially pushed by rises in rents and electricity prices. Monetary policy should remain tight to ensure that inflationary pressures subside. The IMF forecasts inflation at 2% this year and 1.7% in 2025, reaching the Central Bank’s 2% target, although the challenging international environment is likely to exert increasing pressure on the more cyclical segments of export-oriented industries. Switzerland remains high atop the list of preferred tax havens due to its low taxation of foreign corporations and individuals. The flow of overseas wealth to the country has come in for much criticism in past years, due to concerns over tax evasion. However, after signing an agreement on the automatic exchange of information with the European Union, Switzerland put an end to bank secrecy. Since then, Swiss banks have been required to share their clients' information with foreign tax authorities.

Unemployment remained low in 2023 - at 2.2% - and should be stable in the near term. Boosting participation in the labour market, particularly among mothers and older workers, would help reduce labour shortages. Overall, Switzerland is one of the wealthiest countries in the world, with a GDP per capita (PPP) estimated at USD 89,537 in 2023 by the IMF. Nevertheless, according to the latest data available from the Federal Statistical Office, 8.7% of the Swiss population is affected by income poverty.

 
Main Indicators 2023 (E)2024 (E)2025 (E)2026 (E)2027 (E)
GDP (billions USD) 894.81942.27999.601,045.771,085.66
GDP (Constant Prices, Annual % Change) 0.71.31.31.81.2
GDP per Capita (USD) 101,510106,098111,716116,005119,534
General Government Balance (in % of GDP) 0.20.70.40.20.2
General Government Gross Debt (in % of GDP) 33.331.930.829.829.0
Inflation Rate (%) 2.11.31.01.01.0
Unemployment Rate (% of the Labour Force) 2.02.42.52.52.5
Current Account (billions USD) 61.7777.3476.2483.8582.95
Current Account (in % of GDP) 6.98.27.68.07.6

Source: IMF – World Economic Outlook Database, Latest data available.

Note : (E) Estimated data

 

Main Sectors of Industry

Switzerland is one of the most competitive economies in the world due to its strong added value services, its specialized industries and a motivated and highly skilled workforce of 5 million people. Agriculture only represents 0.6% of GDP and employs 2% of the active population (World Bank, latest data available). The primary agricultural products are livestock and dairy products, though the country is also home to over 9,000 wineries. Swiss authorities grant numerous direct subsidies to farmers in order to meet strict ecological criteria, such as soil protection. The country has hardly any mineral resources. Despite the small size of the agricultural industry, organic farming has experienced considerable growth (7,819 organic farms, 18% of the total, according to the Federal Statistical Office), but with big cantonal differences. Official figures show that in 2023 Swiss agriculture generated a gross value added of CHF 4.5 billion, an increase of 4.2% compared with the previous year.

Industry employs 20% of the workforce and constitutes 24.9% of GDP. Switzerland is renowned worldwide for the high quality of its manufactured products, which include watches, motors, generators, turbines and diverse high-technology products. The manufacturing sector alone is estimated to contribute 18% of GDP. The strong industry sector is driven by large exporting groups. Basel, in particular, is home to a very dynamic and powerful chemical and pharmaceutical industry. Electricity is generated chiefly from hydraulic and nuclear power, and hydroelectric resources provide almost two-thirds of the country's energy. Data by the Federal Statistical Office show that as of Q3/2023, the total output in the secondary sector increased by 1.6% year-on-year, while turnover grew by 4.5%.

The service sector represents 71.8% of GDP and employs 78% of the workforce. Well-developed and globally competitive sectors, such as banking, insurance, freight and transport, have contributed to the development of international trade across Switzerland. Insurance firms and banks play a vital role in the Swiss economy, contributing roughly 9% to the GDP. In 2022, the financial sector added approximately CHF 69 billion in value and supported a workforce of about 218,000 full-time equivalent employees. There are 235 banks in Switzerland. In 2022, UBS and Credit Suisse contributed 40% to the combined annual net turnover of Swiss banks. By 2023, UBS had acquired Credit Suisse. The remaining 60% of turnover primarily came from various sources, including the 24 cantonal banks, international banks, Raiffeisen banks, stock exchange banks, regional banks, savings banks, and private banks. Tourism, which adds significantly to the economy, helps to balance Switzerland's trade deficit: after being severely impacted by the COVID-19 pandemic, the sector recovered in 2022 and in 2023, with the hotel sector recording 23.9 million overnight stays during the summer season, the highest level ever observed (+6.3% y-o-y – data Federal Statistical Office).

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 2.2 19.9 77.9
Value Added (in % of GDP) 0.6 24.2 72.4
Value Added (Annual % Change) 8.2 2.3 2.0

Source: World Bank, Latest data available.

 

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Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.

Score:
81,9/100
World Rank:
4
Regional Rank:
1



 

Business environment ranking

Definition:

The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

Score:
8.08/10
World Rank:
8/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024

 

Country Risk

See the country risk analysis provided by Coface.

 

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Political Outline

Current Political Leaders
President of the Swiss Confederation: Karin KELLER-SUTTER (since 1 January 2025)
Vice President: Karin KELLER-SUTTER (since 1 January 2025)
Next Election Dates
President: December 2025
National Council: October 2027
Council of States: each canton decides its own election dates, but these usually take place at the same time as those of the National Council.
Current Political Context
Switzerland's political and legal environment is widely based on consensus-building. For decades, the seven-seat Federal Council has been dominated by the same four main parties: the SVP, the Social Democrats, the FDP liberals and the CVP. In October 2023, voters elected a new parliament for the 2023-2027 legislative period. Compared to the previous election, the People’s Party gained nine seats (for a total of 62) in the House of Representatives, the Social Democrats gained two (41), and the Centre Party gained one (29). The Radical-Liberals obtained 28, the Greens 23, and the Liberal Greens 10. In the 46-seat Senate, the Centre Party and the Radical-Liberals have won the most seats. In 2025, Karin Keller-Sutter, a native of the St. Gallen canton, will be the president of the Swiss Confederation. Guy Parmelin will serve as the Federal Council's vice president in 2025.
In 2024, Swiss voters took part in several referendums that addressed important national issues. They rejected a plan to raise the retirement age on March 3 but accepted an idea for the 13th OASI pension payment. While measures on health insurance rates and immunizations failed, a plan to increase renewable energy was approved on June 9. A biodiversity project and a reform for occupational pensions were rejected in the ballot on September 22. Ultimately, the government suffered its third consecutive defeat at the polls on November 24, when voters rejected proposals to extend the motorway network.
Concerning foreign and defence policy, in August, a report by Swiss experts commissioned by the Swiss Defense Ministry recommended adapting the country's neutrality policy by strengthening ties with NATO, particularly in areas like digital and hybrid warfare, without pursuing full membership. This proposal sparked significant debate regarding the future of Swiss neutrality.
Main Political Parties
The main parties represented in the parliament are:

- Swiss People's Party (SVP/UDC): populist right-wing group; strong base in German-speaking areas of Switzerland
- Social Democratic Party (SP/PS): centre-left, advocates for social justice, equality, and sustainable development
- The Liberals (FDP/PRD/PLR): centre-right, supports economic liberalism
- The Centre: centre-right (formed from the merger of the Christian Democratic Party and the Conservative Democratic Party)
- Green Party (PES): environmentalist and pacifist party
- Green Liberal Party (GL): left-wing environmentalist group
- Evangelical People's Party (EVP): centre-left
- Federal Democratic Union (EDU/UDF): right-wing
- Swiss Party of Labour (PST/POP): far-left, communist
- Ticino League (Lega): right wing, regionalism
- Geneva Citizens Movement (MCG): right wing.

Type of State
Switzerland is a federal republic with a unique system of direct democracy, combining elements of parliamentary governance with extensive citizen participation through referendums and initiatives. It consists of 26 cantons, which enjoy a high degree of decentralization and autonomy, each with its own constitution and governing structures.
Executive Power
The President of Switzerland holds a ceremonial role, chairing the Federal Council and representing the country at official functions, but does not serve as a chief of state or head of government in the traditional sense. The position rotates annually by law among the seven members of the Federal Council, Switzerland's collective executive body. The Federal Council, elected by the parliament for a four-year term, governs jointly, with no single member holding individual executive authority. Under Switzerland's constitution, the composition of the Federal Council is not determined by a parliamentary majority but reflects a longstanding four-party power-sharing arrangement established in 1959, commonly known as the 'magic formula'.
Legislative Power
The legislature in Switzerland is bicameral. The parliament, called Federal Assembly, consists of the Council of States (upper house) and the National Council (lower house). The former is comprised of 46 seats, with two members selected from each of the 20 cantons (states/provinces) and one from each of the six half-canton. The National Council is comprised of 200 seats, with its members elected by popular vote on the basis of proportional representation. Members of both the Council of States and the National Council serve four year terms. Unlike parliamentary systems, the executive (Federal Council) is not dependent on parliamentary confidence and cannot be dissolved by a vote of no confidence. The Federal Council operates independently of the Federal Assembly, and there is no mechanism for dissolving the government mid-term. The federal legislative power is vested in both the government and the parliament.
 

Indicator of Freedom of the Press

Definition:

The world rankings, published annually, measures violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire incorporating the main criteria (44 in total) to assess the situation of press freedom in a given country. This questionnaire was sent to partner organisations,150 RWB correspondents, journalists, researchers, jurists and human rights activists. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).

World Rank:
10/180

Source: World Press Freedom Index, Reporters Without Borders

 

Indicator of Political Freedom

Definition:

The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.

Ranking:
Free
Political Freedom:
1/7
Civil Liberties:
1/7

Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House

 

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Latest Update: February 2025