Economy of Switzerland. How much is the lowest discount rate in the world
In this article, we will talk about a country that has become famous throughout the world for its chocolate, cheese, watches and, most importantly, banks. As you may have guessed, we are talking about Switzerland, which banking system is considered one of the most reliable in the world. Economically, this country is highlighted by the fact that it has virtually no minerals, and 70% of GDP is formed by the services sector. The National Bank of Switzerland has the lowest interest rate of -0.75%, but as the Swiss economy develops, we will be able to sort out the key indicators of the economy of this remarkable country.
Economy of Switzerland: GDP
First of all, what you need to pay attention to is GDP growth, which fully reflects the development of the economy. Over the past three years, Switzerland’s GDP growth has reached a 2% mark once, while the average is at 1.2%, which is not the benchmark among the developed economies of the world. The main reason for this growth in the Swiss economy is the rather low level of inflation and the absence of significant leverage, as the interest rate of the National Bank of Switzerland is already the lowest in the world. Despite the slow growth of GDP, this per capita index exceeds $ 75.0 thousand, which is almost 50% higher than the United States, where GDP per capita is $ 52.0 thousand.
Fig. 1. Dynamics of changes in GDP growth in annual terms from 2015 to 2018.
Economy of Switzerland: Unemployment rate
The unemployment rate in Switzerland is also one of the lowest among those countries, which I already wrote about in my articles. According to the latest data, the unemployment rate in Switzerland is 2.9%, thus second only to Japan, which has a 2.5% indicator. The labor market is in a state of almost full employment, and therefore, there is also practically no maneuver to stimulate the level of inflation in the country, due to a further reduction in unemployment and an increase in the general purchasing power of the population.
Fig. 2. The dynamics of changes in the unemployment rate from March 2017 to February 2018.
Economy of Switzerland: Inflation
According to the latest data, the inflation rate in Switzerland is 0.8%, which is the lowest among countries such as the USA, Japan, Canada, Australia, New Zealand, the United Kingdom, and below the Eurozone inflation rate of 1.1% . One of the main reasons for this situation with inflation is the fact that the Swiss franc is one of the safe haven currencies, which are all provided with gold. The Swiss law requires a minimum of 40 per cent gold reserves to support each franc that is in circulation.
Fig. 3. Dynamics of changes in the level of inflation from March 2017 to February 2018.
It is worth noting the fact that, despite the rather low values of Switzerland’s economic growth, the state of the economy of this country is at a very high level, which by and large can envy even the United States. The only problem for Switzerland is that in the coming years, and maybe longer, the acceleration of economic growth will be very difficult. To a large extent this is connected with the fact that 70% of Switzerland’s GDP is a service sector, or more precisely, it is the provision of financial services that will always support the Swiss franc.