Banking is one of the most important businesses in Switzerland. Many banks have started to use the Internet for business purposes.
Switzerland has one of the world’s highest per capita GDPs and a highly skilled workforce. The economy relies on financial services, precision manufacturing, metals, pharmaceuticals, chemicals, and electronics.
About two-thirds of Switzerland’s territory is covered with forests, lakes and mountains. Since Switzerland has no mineral resources, it has to resort to importing, processing and reselling them as products. The service sector is the most important part of the economy. This includes banking, assurances and tourism. Farming is also an important segment of the Swiss economy, but Swiss farming cannot fulfil the needs of the entire Swiss population, so the country has to import goods. Less than 10% of the population is employed in agriculture, also considered the primary sector, which is strongly supported by the government.
About 40% of the population is employed in the industry, trade and handicraft, also considered the secondary sector. This sector includes the machine-building and metal-processing industry, watch industry and the textile industry. All of them export most of their products and suffer a lot because of the expensive Swiss Franc. The fact that Switzerland is not an EU member additionally slows down the Swiss exports. More than 50% of the population is employed in the service sector, also considered the tertiary sector. This sector includes banking, assurances, tourism and so on. Banking is one of the most important businesses in Switzerland. Many banks have started to use the Internet for business purposes.
Less than 10% of the population is employed in agriculture. This sector is strongly supported by the government.
The country’s real GDP is expected to increase by 3% in 2022 and 2.1% in 2023. Activity rebounded in 2021 as restrictive measures were lifted, but the successive waves of the pandemic in the second part of the year have added to uncertainty. The continued growth in exports, notably in the chemical and pharmaceutical sectors, and improving sentiment should support private investments. Better labour market prospects and the reduction of currently high savings will underpin consumption growth. With high energy prices, inflation has crept up but is projected to remain moderate.
Switzerland’s economic freedom score is 81.9, making its economy the 4th freest in the world according to the 2021 Index. Its overall score has decreased by 0.1 points, with only small changes registered in individual indicators. Switzerland is ranked 1st among 45 countries in Europe, and its overall score is above the regional and world averages.
Switzerland’s economy remains in the free category where it has been for more than a decade. Only four other countries achieved that elite status this year. Economic freedom is well established and institutionalized in Switzerland. Were it not for its perpetual and comparatively low scores on the tax burden and government spending indicators, Switzerland might well have been the top-rated country according to the Index.
Protection of property rights is strongly enforced, and an independent and fair judicial system is institutionalized throughout the economy. Intellectual property rights are respected and enforced. Commercial and bankruptcy laws are applied consistently and efficiently. The government is free from pervasive corruption, thanks largely to its strong institutions. Switzerland is ranked 4th in Transparency International’s 2019 Corruption Perceptions Index.
The continued growth in exports, notably in the chemical and pharmaceutical sectors, and improving sentiment should support private investments.
Cantonal-level taxation is more burdensome than federal-level taxation. The top federal income tax rate is 11.5 percent. The federal corporate tax rate is 8.5 percent. The overall tax burden equals 27.9 percent of total domestic income. Government spending has amounted to 32.8 percent of total output (GDP) over the past three years, and budget surpluses have averaged 1.2 percent of GDP. Public debt is equivalent to 39.3 percent of GDP.
Switzerland did not keep pace with other countries this year in terms of improving the business environment. Labour productivity is high, and there is no federally mandated minimum wage. Switzerland has lax price control, but its agricultural sector remains protected and heavily subsidized with direct subsidy payments comprising two-thirds of an average farm’s profits.
Switzerland has 31 preferential trade agreements in force. The trade-weighted average tariff rate is 2.0 percent, and 154 non-tariff measures are in effect. The consistent, transparent, and modern investment framework supports and facilitates foreign investment. Supported by a sound regulatory regime, the competitive financial sector offers a wide range of financing instruments. Banking remains well-capitalized, facilitating access to credit.