The small European nation of Switzerland beat sky-high inflation. Here's how

ZURICH — As galore countries crossed the globe conflict stubbornly precocious inflation, the emergence successful prices has been acold little melodramatic successful Switzerland, a tiny mountainous federation successful occidental Europe.

Inflation successful Switzerland deed a 29-year precocious of 3.5% successful 2022. While inactive precocious by Swiss standards, it is good beneath the double-digit rates of different precocious economies, similar the U.S. (9.1%), the U.K. (11.1%) and the euro zone (10.6%).

"I deliberation they consciousness it much overseas than present successful Switzerland," 1 shopper successful Zurich told CNBC past month. "My parent is surviving successful Germany, successful Berlin, and she is telling maine ever [that] everything became truthful expensive."

What are the factors that helped structure Switzerland from rampant inflation? CNBC explores.

Switzerland is 1 of the world's wealthiest countries, with a GDP per capita that outstrips that of different large economies, similar the U.S., Japan and Germany.

It is besides location to immoderate of the richest citizens successful the world, with a mean wealthiness of $696,604 per big — and a steep cost-of-living to match. 

The Swiss cities of Zurich and Geneva held dependable among the world's 10 astir costly cities past year, according to the Economist Intelligence Unit, adjacent arsenic ostentation pushed up surviving costs successful different pricey places, specified arsenic Singapore and New York. 

As a result, Swiss citizens are mostly little impacted by terms rises, arsenic they thin to walk a little proportionality of their income connected essentials specified arsenic nutrient and accommodation, versus connected discretionary items.

"Because radical are connected mean rather rich, the stock of nutrient successful the wide fund of households is not arsenic large arsenic possibly successful different countries," Tobias Straumann, prof of economical past astatine the University of Zurich, told CNBC.

"We besides person inequality, of course. But, from an planetary perspective, we have, I think, a precise well-functioning societal policy," helium added.

Another crushed for Switzerland's comparative terms stableness stems from the beardown Swiss franc.

The country's currency has steadily strengthened, rising successful worth to reach parity against the euro successful 2022. While galore currencies plunged against an appreciating U.S. dollar, the Swiss franc held steady amid volatility successful Europe.

That's mostly owed to its presumption arsenic a "safe haven" currency oregon antiaircraft asset. The Swiss franc is heavy backed by ample reserve of gold, bonds and fiscal assets, which assistance the Swiss National Bank guarantee the currency's stableness during times of volatility. 

That besides benefits Switzerland, an system heavy babelike connected planetary trade.  

Switzerland imports astir $302 billion worthy of goods and services each year, the bulk of which travel from neighboring EU countries. A stronger Swiss franc provides an effectual discount connected those imports. 

Switzerland meantime exports a adjacent adjacent $305 billion annually — mostly comprising higher worth goods and services, specified arsenic watches and pharmaceuticals, which are little susceptible to terms fluctuations than are low-margin, mass-produced commodities.

Switzerland is besides little exposed to immoderate of the outer factors that pushed prices higher successful 2022, specified arsenic Russia's warfare successful Ukraine. 

Home to a mountainous topography and much than 1,500 lakes, Switzerland is little reliant connected lipid and state imports than immoderate of its European neighbors, with hydroelectricity playing an important relation successful its energy supply.

Swiss vigor suppliers are besides largely publically owned, meaning that they are little exposed to utmost marketplace volatility done financial information nets, portion being taxable to stricter pricing regulation.

At the extremity of 2022, vigor prices successful Switzerland roseate astatine a complaint of 16.2% — beneath the levels faced by large peers similar Germany (25%), the Netherlands (30%), the U.K. (52.3%) and Italy (64.7%). The country's vigor regulator present expects prices to emergence by a further 27% successful 2023, with the mean household vigor measure topping 1,215 Swiss francs ($1,238).

Jean-Claude Huber, manager of Hotel Piz Buin Klosters successful the eastbound of Switzerland, said that the standardization of semipermanent vigor contracts has helped structure businesses similar his from immoderate large terms rises this year.  

The four-star hotel's dynamic pricing operation besides means that Huber has been capable to walk connected terms hikes of astir 5-10% to customers without hurting demand. 

"We tin play with the rates overmuch much than if you person fixed rates each the time, and that helps america a lot. I'm definite the costs volition beryllium higher than before, but the turnover should beryllium higher arsenic well," Huber said. 

Alongside energy, Switzerland besides has stringent controls connected the terms of goods and services, which besides makes them little susceptible to inflation-led fluctuations.

Of the halfway products utilized to measurement ostentation successful the euro zone, including food, lodging and transport, astir 1 3rd (30%) are taxable to terms regularisation successful Switzerland — much than successful immoderate different European country.

Swiss nutrient prices roseate astatine an annualized complaint of 4.0% successful December past year, compared with 11.9% successful the U.S., 16.9% successful the U.K., and 19.8% successful Germany. 

High tariffs connected certain cultivation imports besides mean that domestically produced foods, specified arsenic beverage and cheese, are preferentially priced and little impacted by movements successful planetary nutrient markets. That, successful turn, has helped stimulate the country's economy.

"We effort to bargain arsenic overmuch arsenic imaginable Swiss, but adjacent regional," Huber said. "Long-term, you privation to person a section manufacture working, functioning."

That doesn't mean that Swiss consumers person been wholly immune to caller terms hikes. Locals who spoke to CNBC noted a comparative emergence successful the terms of rental accommodation, arsenic good arsenic successful that of immoderate nutrient products.

"When you're a tenant ... I deliberation that's possibly a constituent which increases a bit," 1 shopper told CNBC.

However, the Swiss National Bank said successful December that it sees ostentation falling to an mean of 2.4% successful 2023, earlier reaching 1.8% successful 2024.

That would travel successful nether the bank's 2% target. Still, economists said that is improbable to wounded the economy.

"Even if we person a benignant of recessionary scenario, radical are inactive coming in, and that, of course, stabilizes demand," Straumann said, referring to the escaped question of radical crossed Europe. "I expect the aforesaid happening for this year, 2023, and astir apt besides for 2024."

Switzerland's unsocial economical scenery is decades successful the making and hard for astir countries to replicate wholesale. Its speech complaint policy, for instance, could not beryllium mirrored by the wider euro zone, fixed the disparate economies involved.

However, Straumann said that the nationalization of Swiss vigor proviso offered an important acquisition to different countries, peculiarly those nations successful Europe that underwent a wide displacement to privatization and are present paying the price.

"In the mean to short-term, that was a precise bully idea," said of the privatization of vigor supply. "But it's not precise resilient and they are haunted by that now."

"At the time, galore radical said the Swiss are excessively conservative," helium added. "But I'd accidental successful retrospect it was a precise bully decision."