ECONOMY SWITZERLAND

SWITZERLAND ECONOMIC INDICATORS

Fast facts of the economy of Switzerland
-Switzerland is the economy number 19 in the world with a GDP valued above 380 trillion USD. But generally speaking per capita, Switzerland is the 5th richest country in the world.
-Service industry, particularly banks, insurance and financial services are well developed and employ more than 60% of the economically active population. These industries account for 70% of its total GDP.

-The Swiss National Bank (SNB) is responsible for the monetary policy of the country. Like other central banks, all decisions taken by the SNB are via voting.
-A difference between the SNB and other central banks is that changes in monetary policy can be made at any time.
-The SNB inflation target is 3%
-Another difference with other central banks is that the SNB does not fix a single rate, but a target range (e.g. 2% - 2.5%).
-The USD/CHF has a strong (negative) correlation with the EUR/USD. Both act as a mirror, when one rises the other low and vice versa.

Switzerland important economic indicators

Rate of interest
As we already mentioned, the changes in the interest rate of Switzerland can be made at any time and have a target range. The SNB move the range to try to control inflationary pressures.
When the range of the interest rate increases, the CHF tends to gain value.
When the range of the interest rate decreases, the CHF tends to lose value.
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Gross Domestic Product (GDP)
The GDP measures the growth of the economy Switzerland in a given period.
A number can be made to appreciate the CHF.
A bad number can make the CHF to depreciate.
It is important to mention that if the growth rates are high and consistent they can create inflationary pressure and you can do that the SNB will increase your range of interest rate. However, if the growth rates are low, the SNB can respond by reducing the range.
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Trade balance
The Swiss trade balance measures the exports minus imports. When the country's exports are greater than imports the balance has a positive value (and vice versa). The first commercial partner of Switzerland is the eurozone followed by US.
A good fact, CHF tends to gain value.
A wrong fact, CHF tends to lose value.
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CPI
As we know it, the CPI is the key ingredient to measure a country's inflation. Basically when the CPI increases, the purchasing power of the CHF decreases (and vice versa).
SNB target inflation is less than 3% per year.
As a result of a good number CHF tends to appreciate against other currencies.
As a result of a bad number CHF tends to depreciate against other currencies.
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Minutes of the monetary policy
The SNB members meet to discuss the current conditions of the economy, as well as future conditions.
Investors focus on key elements that allow them to have information about future increases/reductions in the rate of interest, inflation or growth target range.
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