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In December 2023, the average rate of inflation in the EU stood at + 3.4% compared to previous year. The lowest rate recorded was in Denmark (+ 0.4%) and the highest in the Czech Republic (+ 7.6%).  In comparison, Switzerland’s inflation rate stood at +2.3%  for the same period.

With a relatively low rate of inflation and traditionally, with a higher purchasing power compared to other European countries, life in Switzerland should be good. On closer inspection however, there are some fundamental changes taking place in Switzerland that are worth taking a closer look at.

 

Recent trends

Like most countries, the rate of inflation in Switzerland is determined by a consumer price index (CPI), which in Switzerland is set by the Federal Statistical Office (FSO). The FSO collects details on around 100’000 goods and services each month. This “basket of goods” ranges from food and clothes to medicine and oil. The more households spend on any particular product, the greater share the product has in the total value of the basket. For example: rent for family accommodation, has a greater share in the basket than certain individual food items.

  • Between 2020 and 2023 food prices went up 6% . (The same figure in Germany was +17%).
  • Unavoidable or obligatory costs such as health insurance and rent have made a big dent in Swiss household budgets.

Unavoidable price increases such as rent and insurances have also created the perception with the Swiss population, that overall costs have risen more steeply than is perhaps the reality. This has led to the population of Switzerland starting to cut back on spending.

 

 

 

 

So where are the Swiss trying to save?

In times of inflation, people generally first cut luxury items to try and reduce living costs. Given that Switzerland is already an expensive country, it should come as no surprise that hospitality has been one of the first areas where people looked to save money.

  • According to a recent survey, just over half (52%) of those surveyed said they have cut back going out to bars and clubs as well as eating out. Some of the other non-essentials where reductions were recorded are:
    • Clothing (42%)
    • Holidays (41%)
    • Leisure activities (41%)
    • Food (34%)
    • Personal services (32%)
    • Furniture and household items (31%)
    • Cultural events (29%)
    • Vehicle costs (28%)
    • Electronic products (25%)
    • Ancillary housing costs (22%)
    • Media/entertainment (22%)
  • Obligatory or key services that have also been earmarked for cost savings by the Swiss include:
    • Health insurance premiums (19%)
    • Telecommunication (16%)
    • Public transport (14%)
    • Financial products excluding insurance (12%)
    • Insurance – excluding health insurance (11%), housing costs (10%) and education (10%).

Future outlook

Declining inflation could eventually ease the need for personal cut backs. However, not all price increases reverse – for example energy prices, especially electricity.  In addition, new spending habits could develop. Home dinner parties versus eating out – the new norm? Of course many Swiss living in tourist areas such as ski resorts have long since embraced this strategy to save money but still enjoy life!

With over 61% of the population paying rent for their living accommodation controlling rent prices would seem to be a solution. But another recent survey showed that from  1’900 people questioned across Switzerland, rent controls appeared to be the least preferred solution when dealing with rising rents.  The consensus is that capping rents could reduce the incentive to build new apartments. And the construction of social housing was a preferred alternative by those questioned.

Inflation and cost cutting on non-essentials to save money has been a way of life for many in recent years. Now it seems this trend has also arrived in Switzerland.  

 

 

Doctor emergency

Another important issue as the baby boomer generation retires, are staff shortages that are emerging in several sectors. Family doctors is just one profession particularly hard hit.  In certain areas such as the Jura in French Switzerland, the number of doctors per capita is only 1/6th of that in Lausanne.

In terms of doctors per capita, and at cantonal level:

  • Geneva comes out top with 29.3 General Practitioners per 10’000 residents.
  • The worst is canton Schwytz at 8.3 per 10’000 residents
  • Other cantons not doing well are:
    • Zurich with 11 GB’s per 10’000 residents
    • Bern with 16.5
    • Basel with 16.6
    • and Vaud with 18 GPs per 10’000 residents.

 

And although the situation with regards to shortage of GP’s in certain parts of Switzerland is now quite bad, the shortage of GP ‘s  is only set to get worse.

  • Over 1/3 (35%) of GP’s are now over 60 years old and many continue to work after the official retirement age of 65.
  • 24% of doctors are over 65 and nearly 14% are 70 or over and even 4% over 74!
  • And with ongoing discussions in parliament regarding the digitisation of the health service in Switzerland still not complete – it seems this is set to go on for some time to come.

What can only be described as a vicious cycle has now set in already in certain areas:

  • As the pool of GPs shrinks, those left need to work longer hours to keep up with demand, making the job more demanding and less attractive to new comers.
  • Another challenge is convincing medical students to become GPs as the demand and rewards of becoming a specialist rise.

And there appears to be no long term solution in view. Pierre-Yves Rodondi, a director at the institute of family medicine at the University of Fribourg is critical of the education system. According to his comments around 60% of young people wishing to become doctors are eliminated and describes the situation as “absurd”.

Summary

There are several global demographic and economic changes happening and these are affecting how people live and their quality of life. Switzerland has not escaped these trends. With baby boomers now retiring, new skilled workers are entering the country to fill vacant positions. The population of Switzerland is now over 9 million for the first time. This increased population is putting pressure on services including the availability of rental accommodation and the number of doctors (GP’s) available to serve the communities. There are no quick fixes to these issues. Switzerland has a culture of open communication and an ability to get to the heart of the matter and find solutions. Time will tell if they get this one right!

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