Swiss Economy

The Swiss economy is among the biggest in the world.

How big?

$659,000 billion. What? Yes, more than half a trillion USD, according to data from the IMF and the World Bank (2016).

Hence, Switzerland’s cousins (in terms of size) are Netherlands (770,000 billion) and Saudi Arabia (639,000 billion).

But we’re only scrapping the surface.

What are Switzerland’s best industries?

Are the Swiss in a ton of debt?

And how about Switzerland’s international trade profile?

All of these below.

Swiss Economy's Characteristics

So we know Switzerland has one of the biggest 20 economies in the world.

Cool. But how many people produce all that?

Population: 8.3 million people according to World Bank statistics (2016).

Damn, that’s a lot of output for such a small population.

My country of origin has about the same amount of people (actually, it should have about 25% more by now) and it’s only in the single-digit billions.

You’ve surely seen the Swiss knife before.

Other countries with a similar amount of people?

Sweden with 9.9 million; and

Austria with 8.7 million people.

With regards to GDP per capita, no surprise…

According to the CIA World Factbook, the Swiss economy stands at $59,400 (2016 estimates), which ranks the country at the 18th place in the world.

Not too shabby at all.

Switzerland is just above of Hong Kong ($58,100) and the United States ($57,300) in the list.

What about economic activity? Any main industries?

As is the norm in the most developed countries, more than 70% of GDP comes from service sectors.

In Switzerland, financial services are prominent, with Zurich being an important financial center in Europe.

As to diversification, the economy is mature and has many different sectors. When it comes to manufacturing, it specializes in high-tech and precision products.

In this vein, the most famous exports are likely Switzerland’s luxury watches.

There’s a Swiss watch for every master-o’-the-world to enjoy.

Trade, trade, and more international trade.

Swiss exports of goods and services in 2016 amounted to 62.9% of GDP.

And imports?

51.9% of Gross Domestic Product.

This means total trade for Switzerland amounts to 114.8% of GDP.

Hey, how can total trade be higher than GDP?

Remember that imports are subtracted from GDP while exports are added, so in reality, the net effect of trade on the Swiss economy is a surplus of about 11% of GDP.

Oh! Our first surplus in the series, cool no?

Exporting more than you import boosts GDP.

Note: let’s remember that Switzerland is in the center of Europe, but it isn’t part of the European Union (or the Eurozone).

When we discussed the Eurozone economy we saw trade numbers which did not include trade between member countries.

In the case of Switzerland, this isn’t a problem, so we have this huge openness (total trade) number which can lead us to believe it’s more open than other European countries, but it really isn’t.

It’s just that we get to count its trade with Germany, France, Italy, and all the others, while we don’t get to do that with the Eurozone as a whole.

The numbers would be considerably smaller (and more comparable), if we took out Switzerland’s trade with Eurozone member countries out of the calculation.

End of note.

Enough about trade. Tell me about debt.

Debt Profile of Switzerland

We already saw that the Swiss economy has a trade surplus, which means it doesn’t have to go into debt as much to finance expenditure.

This surplus is one of several reasons why the Swiss Franc (CHF) is seen as a deposit of value when the markets grow scared.

With regards to household debt, Switzerland’s debt is 128.4% of GDP, the highest among the G20 according to trading economics.

In contrast, government debt as percent of Gross Domestic Product was only 32.6% in Switzerland (2016).

Relative to its peers in the G20, the Swiss government has almost no debt at all.

The Swiss private sector takes charge.

This plays into the notion of Switzerland being a free economy with the private sector in charge of economic development and what not.

I read recently that three quarters of research and development investment in the country comes from the private sector, so this doesn’t sound crazy at all.

And we come to the end. Hope you found it useful, or enjoyable.

See you soon,

Emil Christopher,

The Forex Economist

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