Everyone living in Switzerland enjoys many privileges: high wages, low unemployment and an above-average quality of life to name a few. However, the Swiss population has to pay a lot for these benefits. The price level in Switzerland is more than half that in the EU. This makes Switzerland more expensive than any other EU country. In a global comparison, the franc is still one of the most expensive currencies.
The so-called purchasing power parity at the level of Switzerland’s gross domestic product was 1.67 francs (EU27=1 euro) in 2021, as shown in the list released by the Federal Statistical Office (FSO) on Thursday. Accordingly, the Swiss had to pay 167 Francs (equivalent to 154 Euros) for a shopping cart that cost an average of 100 Euros, at the average rate of last year in 27 EU countries. In 2020, the value was 171 francs.
Compared to the EU, the price level drops a little
According to the list, the price level in Switzerland stood at 154.4 points, after 159.3 points the previous year (EU27=100). According to the BFS, Switzerland is the most expensive country, ahead of Iceland (150.3) and Norway (141.2). The lowest price level in the list was found in Turkey (40.3), North Macedonia (46.5) and Montenegro (51.5).
Neighboring countries Austria (114.1), Germany (111.1) and France (108.4) were above the eurozone average (105.5), while Italy (97.7) and Spain (94.4) were slightly below.
According to the so-called purchasing power parity theory, exchange rates between two countries should actually be balanced so that a similar basket of goods can be purchased for the same amount. Therefore, a Swiss citizen would actually have to pay 1.67 francs for 1 euro to be able to buy the same amount or in this case the same amount as in Switzerland.
The Swiss franc is one of the most expensive currencies in the world.
However, the theory applies above all to goods or services that are easily tradable or easily comparable. British business magazine “The Economist” uses a Big Mac from McDonald’s as a comparison. This is done the same way all over the world.
According to the last edition of this Big Mac Index in July 2022, the popular dish had to be paid the equivalent of $6.71 in Switzerland and $5.15 in the United States. Thus, the Swiss franc was overvalued by around 30 percent against the US dollar. The average cost of a Big Mac in the eurozone is $4.77, which, by this calculation, means that the euro has depreciated by about 8 percent against the US dollar.
The franc, along with the Norwegian krone, was normally one of the most expensive among convertible currencies. The cheapest Big Macs were in Venezuela ($1.76) and Romania ($2.28). (SDA/shq)