ZURICH — As many international locations throughout the globe battle stubbornly excessive inflation, the rise in costs has been far much less dramatic in Switzerland, a small mountainous nation in western Europe.

Inflation in Switzerland hit a 29-year excessive of three.5% in 2022. Whereas nonetheless excessive by Swiss requirements, it’s effectively beneath the double-digit charges of different superior economies, like the U.S. (9.1%), the U.Ok. (11.1%) and the euro zone (10.6%).

“I feel they really feel it extra overseas than right here in Switzerland,” one shopper in Zurich advised CNBC final month. “My mom resides in Germany, in Berlin, and he or she is telling me at all times [that] all the pieces turned so costly.”

What are the elements that helped shelter Switzerland from rampant inflation? CNBC explores.

Switzerland is without doubt one of the world’s wealthiest international locations, with a GDP per capita that outstrips that of different main economies, just like the U.S., Japan and Germany.

Additionally it is residence to a few of the richest residents on the planet, with a imply wealth of $696,604 per grownup — and a steep cost-of-living to match. 

The Swiss cities of Zurich and Geneva held regular among the many world’s 10 most costly cities final yr, in accordance with the Economist Intelligence Unit, whilst inflation pushed up residing prices in different dear locations, equivalent to Singapore and New York. 

Because of this, Swiss residents are usually much less impacted by worth rises, as they have an inclination to spend a decrease proportion of their revenue on necessities equivalent to meals and lodging, versus on discretionary objects.

“As a result of persons are on common fairly wealthy, the share of meals within the general price range of households isn’t as massive as perhaps in different international locations,” Tobias Straumann, professor of financial historical past on the College of Zurich, advised CNBC.

“We even have inequality, after all. However, from a world perspective, we now have, I feel, a really well-functioning social coverage,” he added.

The nation’s foreign money has steadily strengthened, rising in worth to attain parity towards the euro in 2022. Whereas many currencies plunged towards an appreciating U.S. greenback, the Swiss franc held regular amid volatility in Europe.

That is largely as a consequence of its standing as a “secure haven” foreign money or defensive asset. The Swiss franc is closely backed by massive reserve of gold, bonds and monetary belongings, which assist the Swiss Nationwide Financial institution make sure the foreign money’s stability throughout instances of volatility. 

That additionally advantages Switzerland, an financial system closely depending on worldwide commerce.  

Switzerland imports round $302 billion price of products and providers annually, nearly all of which come from neighboring EU international locations. A stronger Swiss franc gives an efficient low cost on these imports. 

Switzerland in the meantime exports a close to equal $305 billion yearly — largely comprising increased worth items and providers, equivalent to watches and prescribed drugs, that are much less prone to cost fluctuations than are low-margin, mass-produced commodities.

Dwelling to a mountainous topography and greater than 1,500 lakes, Switzerland is much less reliant on oil and fuel imports than a few of its European neighbors, with hydroelectricity taking part in an essential position in its vitality provide.

Swiss vitality suppliers are additionally largely publicly owned, which means that they’re much less uncovered to excessive market volatility via monetary security nets, whereas being topic to stricter pricing regulation.

On the finish of 2022, vitality costs in Switzerland rose at a charge of 16.2% — beneath the degrees confronted by main friends like Germany (25%), the Netherlands (30%), the U.Ok. (52.3%) and Italy (64.7%). The nation’s vitality regulator now expects costs to rise by an additional 27% in 2023, with the common family vitality invoice topping 1,215 Swiss francs ($1,238).

Jean-Claude Huber, supervisor of Lodge Piz Buin Klosters within the east of Switzerland, mentioned that the standardization of long-term vitality contracts has helped shelter companies like his from any main worth rises this yr.  

The four-star lodge’s dynamic pricing construction additionally signifies that Huber has been capable of go on worth hikes of round 5-10% to prospects with out hurting demand. 

“We are able to play with the charges far more than you probably have mounted charges on a regular basis, and that helps us lots. I am positive the prices might be increased than earlier than, however the turnover needs to be increased as effectively,” Huber mentioned. 

Alongside vitality, Switzerland additionally has stringent controls on the worth of products and providers, which additionally makes them much less prone to inflation-led fluctuations.

Of the core merchandise used to measure inflation within the euro zone, together with meals, housing and transport, nearly one third (30%) are topic to cost regulation in Switzerland — greater than in some other European nation.

Swiss meals costs rose at an annualized charge of 4.0% in December final yr, in contrast with 11.9% within the U.S., 16.9% within the U.Ok., and 19.8% in Germany. 

Excessive tariffs on sure agricultural imports additionally imply that domestically produced meals, equivalent to milk and cheese, are preferentially priced and fewer impacted by actions in international meals markets. That, in flip, has helped stimulate the nation’s financial system.

“We attempt to purchase as a lot as doable Swiss, however even regional,” Huber mentioned. “Lengthy-term, you need to have an area business working, functioning.”

Nonetheless, the Swiss Nationwide Financial institution mentioned in December that it sees inflation falling to a median of two.4% in 2023, earlier than reaching 1.8% in 2024.

That may are available beneath the financial institution’s 2% goal. Nonetheless, economists mentioned that’s unlikely to harm the financial system.

“Even when we now have a type of recessionary state of affairs, persons are nonetheless coming in, and that, after all, stabilizes demand,” Straumann mentioned, referring to the free motion of individuals throughout Europe. “I anticipate the identical factor for this yr, 2023, and doubtless additionally for 2024.”