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How does Switzerland keep inflation low?

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Gaston de Persigny
Gaston de Persigny
Gaston de Persigny - Reporter at The European Times News

In the Alpine country it is just over 3%, and in the Eurozone – 9%

High inflation is the most serious problem in a number of countries on the Old Continent, and in the Eurozone alone it is almost 9 percent. However, there is one country in Europe with relatively low inflation. This is Switzerland.

With inflation in the country just above 3 percent, prices in Switzerland remain relatively stable. According to experts, one of the reasons is the stability of the Swiss franc, which ensures stable purchasing power.

Another very important factor is electricity prices. While in Germany it marked a growth of 22%, in Switzerland the increase was only a little over 3%. According to experts, this is due to the relatively closed electricity market in the country. With the help of various technologies, they manage to satisfy the needs of the population and businesses for most of the year. This is also the reason why the shocks in the world markets are not so strongly felt.

Pricing in the country is also important for low inflation. When determining the final price, the main weight in many cases is the labor involved, and not the price of the raw materials and products.

An example can be given with bread, because with it labor is the main weight in pricing in Switzerland.

According to the data, an average kilogram of bread in Switzerland costs 5.5 euros in euros, and 2.4 euros in Germany. How does the mechanism work if the price of flour has increased by 10 cents.

An equal increase in flour of 10 cents will lead to a 2% increase in the price of bread in Switzerland and 4% in Germany. If Bulgaria is included in the table, the percentage will be even higher here because of the lower cost of labor.

Another distinctive feature of the Swiss is the special attention to their native production. It provides for the import of products from abroad only if they do not represent direct competition for local producers. Switzerland also has mechanisms in place so that even if imported goods come from countries with higher inflation, it will not be felt in the country.

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