Macroeconomic Analysis of Switzerland - Report - Macroeconomics course - MBA - CEU Business School 2016

1. By
Phani Kumar Nelanuthula

2. Table of Contents
1. Brief information about Switzerland
2. Switzerland’s Monitory and Fiscal Policies
3. SNA Indexes
4. Labor Market of Switzerland
5. Comparison with India
6. Recommendations
7. Appendix – A - Charts
8. Appendix – B - Articles and Websites Refered

3. Switzerland
Switzerland has the fastest economic
growth since 2002, It is one the most
developed and stable economy based
country. It is having a Federal Republic
Government. Switzerland’s new
constitution establishes a unified and
neutral state. Switzerland’s is among the
countries which are net International
Creditors
Switzerland is a member of
1. International Bank for Reconstruction and Development (IBRD) since1992.
2. International Development Association (IDA) Since 1992
3. International Finance Corporation (IFC) Since 1992,
4. Multilateral Investment Guarantee Agency (MIGA) since 1988
5. International Centre for Settlement of Investment Disputes (ICSID) since 1998.
Country Switzerland
Capital None
Federal City Bern
Currency Swiss Franc (CHF)
Fiscal Year Calendar Year
Population 8,286,976
Life expectancy at
birth
82.849

4. Switzerland’s Monitory and Fiscal Policies:
https://www.bostonfed.org/-/media/Documents/neer/neer202l.pdf
http://www.snb.ch/en/mmr/reference/snb_legal_nbg_rev/source/snb_legal_nbg_rev.en.pdf
Monetary Policy:
Since 2002, the Swiss National Bank (SNB) considers price stability to be achieved with an
annual inflation (CPI) rate of less than 2 %. The Bank bases its monetary policy decisions on
a medium-term (three-year) inflation forecast. The new framework differs from inflation
targeting in one important aspect, namely, it does not contain an institutional commitment
to an inflation target as the overriding objective of monetary policy.
Two reasons for Switzerland’s Stable economy
1. Healthy Financial Position of Public
2. Proper rules and Culture Enforcing Stability is worked across Political Structure As per
Article 14 Swiss National Bank law the following criteria should be followed for Securities
eligible as Collateral at Switzerland National Bank.

5. Fiscal Policy
http://www.sgi-network.org/2014/Switzerland/Economic_Policies
Switzerland is Fiscally sustainable for the following factors:
1. Maintaining Low Tax Load and Lean state.
2. Keeping Public Deficit and Debt Low
3. Constitutional Debt Brake: As per Article 126 and 159 of Swiss Constitution, the
maximum of total expenditures is determined in the budget by taking expected receipts into
account.
4. Switzerland does not contain a minimum wage policy.
5. Switzerland invests more in research and innovation, it ranked number 1 in Global
Innovation Index.
6. It provides considerable health benefits to people
% of health care expenditure not financed by private households out of pocket
payments in 2011 is 75%
7. It provides Social security benefits to the unemployment
% of unemployed receiving regular periodic social security unemployment benefits
in 2012 is 61.9%
SNA Indexes as Per World Bank Data
Index 2015 2014 2013
GDP 664.738 Billion USD 701.037 Billion USD 684.919 Billion USD
GDP per-capita PPP 60,535 USD 59535 USD 59351
GDP Per Capita 80,214 USD 85,610 USD 84,669 USD
Economic Growth 0.91% 1.88% 1.76%
Inflation Rate (CPI) -1.1% 0.0% -0.2%
Inflation (GDP deflator) -1.29% -0.71% -0.02%
NNI Per-capita 49469 USD 47719 USD 48348 USD
NNI 410.247 Billion USD 390.752 Billion USD 391.106 Billion USD
GNI (Atlas Method) 697.627 Billion USD 704.202 Billion USD 712.798 Billion USD
http://data.worldbank.org/country/switzerland
https://data.oecd.org/natincome/net-national-income.htm

6. As per Federal Statistical Office Switzerland
Overview of the national economy (in millions of Swiss francs, at current prices)
Main indicators of the national accounts 2014p 2015p
GDP at current prices 643 784 645 556
GDP per capita (in Swiss francs) 78 619 77 943
Gross national income (GNI) 649 803 660 333
Final consumption expenditure of households 347 311 348 133
Final consumption expenditure of the government 71 974 73 113
Savings of households 87 324 81 651
Disposable income of households 392 214 386 585
Trade balance 75 912 75 618
https://www.bfs.admin.ch/bfs/en/home/statistics/national-economy.html
Alternate Indexes
Index Rank in 2015 Web links
Global Innovation Index. 1 https://www.globalinnovationindex.org/userfiles/file/r
eportpdf/GII-2015-v5.pdf
Human Development Index 3 http://hdr.undp.org/en/countries/profiles/CHE
Global Terrorism Index 95 http://economicsandpeace.org/wp-
content/uploads/2015/11/Global-Terrorism-Index-
2015.pdf
Human Freedom Index 2 https://www.cato.org/human-freedom-index
Corruption Perceptions
Index
7 http://www.transparency.org/cpi2015
Youth Development Index 4 http://cmydiprod.uksouth.cloudapp.azure.com/sites/de
fault/files/2016-
10/2016%20Global%20Youth%20Development%20Ind
ex%20and%20Report.pdf

7. Labor Market of Switzerland:
http://data.worldbank.org
http://www.ilo.org/ilostat/faces/home/statisticaldata/ContryProfileId?_afrLoop=22164324520014#!
%40%40%3F_afrLoop%3D22164324520014%26_adf.ctrl-state%3Dmwimcugqp_154
2015 2014 2013
Population 8,286,976 8,188,649 8, 089, 346
Population (age 0-14) 14.77% 14.76% 14.79%
Population (age 15 -65) 67.18% 67.39% 67.61%
Population (age 65 and
above)
18.04% 17.83% 17.59%
Labor force 5,568,019 4,753, 196 4700905
Labor force Participation
rate
68.9% 68.1% 68.2%
Unemployment rate 4.6% 4.5% 4.4%
Youth Unemployment rate 8.6% 8.7% 8.8%
Age dependency ratio
(% working Population)
48.848% 48.37% 47.90%
Observations:
1. Switzerland Labor Force and Labor Force Participation rate is increasing annually
2. Unemployment rate is very consistent.
3. Youth unemployment rate is also consistent but greater than unemployment rate.
4. Age dependency ratio is too high; statistics indicates for every 1 dependent there are 2
working age people exists in Switzerland.
Comparison with India:
http://www.ilo.org/ilostat/faces/home/statisticaldata/ContryProfileId?_afrLoop=22164324520014#!
%40%40%3F_afrLoop%3D22164324520014%26_adf.ctrl-state%3Dmwimcugqp_154
India, in 2014, the percentage of Labor force participation rate is 52.5%
Registered Unemployment rate is 4.9%

8. 1. Huge population and less Job Opportunities lead nearly 15 percentage points less in
Labor Force Participation rate.
2. Women, Labor Force Participation rate is in 2014 is 25.8% is a big factor for such a low
Labor Force Participation Rate.
3. Though Unemployment rates are near to each other, in both the countries, the value is
very high in India.
4. Lack of proper Fiscal Policy in terms of Job protection and sustainability, is one of the
main reasons of instability in India for a long time.
Recommendations:
1. Switzerland is near to equilibrium and is taking good sustainable measures.
2. Its inflation rate is less than 2% and trending towards -1%.
3. It should concentrate on monetory policy in creating demand and
4. Fiscal policy in reducing the Youth unemployment rate.
5. It should concentrate more on International trade.

9. APPENDIX A
Charts

12. APPENDIX B
Articles and Websites Refered
Fiscal and Monetory Policy
https://www.bostonfed.org/-/media/Documents/neer/neer202l.pdf
http://www.snb.ch/en/mmr/reference/snb_legal_nbg_rev/source/snb_legal_nbg_rev.en.pd
f
http://www.snb.ch/en/mmr/speeches/id/ref_20121121_zur
http://www.sgi-network.org/2014/Switzerland/Economic_Policies
SNA Details
http://data.worldbank.org/country/switzerland
https://data.oecd.org/natincome/net-national-income.htm
https://www.bfs.admin.ch/bfs/en/home/statistics/national-economy.html
Alternate Index
https://www.globalinnovationindex.org/userfiles/file/reportpdf/GII-2015-v5.pdf
http://hdr.undp.org/en/countries/profiles/CHE
http://economicsandpeace.org/wp-content/uploads/2015/11/Global-Terrorism-Index-
2015.pdf
https://www.cato.org/human-freedom-index
http://www.transparency.org/cpi2015
http://cmydiprod.uksouth.cloudapp.azure.com/sites/default/files/2016-
10/2016%20Global%20Youth%20Development%20Index%20and%20Report.pdf
Labor Market of Switzerland
http://data.worldbank.org
http://www.ilo.org/ilostat/faces/home/statisticaldata/ContryProfileId?_afrLoop=221643245
20014#!%40%40%3F_afrLoop%3D22164324520014%26_adf.ctrl-state%3Dmwimcugqp_154
Comparison with India
http://www.ilo.org/ilostat/faces/home/statisticaldata/ContryProfileId?_afrLoop=221643245
20014#!%40%40%3F_afrLoop%3D22164324520014%26_adf.ctrl-state%3Dmwimcugqp_154