2014 Index of Economic Freedom

Switzerland

overall score81.6
world rank4
Rule of Law

Property Rights90.0

Freedom From Corruption88.1

Limited Government

Government Spending65.7

Fiscal Freedom68.9

Regulatory Efficiency

Business Freedom75.4

Labor Freedom87.4

Monetary Freedom85.2

Open Markets

Trade Freedom90.0

Investment Freedom85.0

Financial Freedom80.0

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Quick Facts
  • Population:
    • 8.0 million
  • GDP (PPP):
    • $363.4 billion
    • 1.0% growth
    • 1.2% 5-year compound annual growth
    • $45,418 per capita
  • Unemployment:
    • 2.9%
  • Inflation (CPI):
    • -0.7%
  • FDI Inflow:
    • $3.6 billion
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Switzerland’s economic freedom score is 81.6, making its economy the 4th freest for the first time ever in the 2014 Index. Its score is 0.6 point higher than last year, with improvements in trade freedom and the management of public spending partially offset by declines in monetary freedom and labor freedom. Switzerland is ranked 1st out of 43 countries in the Europe region.

Switzerland was first graded in the 1996 Index, and its economic freedom score has advanced since then by 4.8 points. Improved ratings for six of the 10 economic freedoms, led by the sound management of public spending and notable enhancements in the area of market openness as measured through trade freedom and financial freedom, have enabled Switzerland to advance to economically “free” since 2010.

As reflected in the steady rise of its economic freedom over the 19 years it has been graded, Switzerland’s strong competitiveness is built on flexibility and openness. The sound regulatory environment encourages entrepreneurial activity and innovation. Banking regulations and lending practices are prudent and sensible. The judicial system, independent and free of corruption, provides strong protection of property rights.

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Background

Switzerland’s federal system of government disperses power widely, and executive authority is exercised collectively by the seven-member Federal Council. Switzerland has a long tradition of openness to the world but jealously guards its independence and neutrality. It did not join the United Nations until 2002, and two referenda on membership in the European Union have failed by wide margins. Membership in the European Economic Area was rejected by referendum in 1992. Switzerland is one of the world’s richest and most investment-friendly countries and has a well-developed financial services industry. In addition to banking, the economy relies heavily on precision manufacturing, metals, pharmaceuticals, chemicals, and electronics. Economic growth was solid but slow in 2013. Unemployment is around 3 percent.

Rule of LawView Methodology

Property Rights 90.0 Create a Graph using this measurement

Freedom From Corruption 88.1 Create a Graph using this measurement

In 2013, the government broadened anti-corruption laws to make bribery almost always a criminal offense. Protection of property rights is strongly enforced, and an independent and fair judicial system is institutionalized throughout the economy. Commercial and bankruptcy laws are applied consistently and efficiently. Intellectual property rights are respected, and enforcement is consistent with world standards.

Limited GovernmentView Methodology

Switzerland’s tax regime remains more burdensome at the cantonal level than at the federal level. The top federal income tax rate is 11.5 percent, with a combined tax rate that can reach 41.5 percent. The federal corporate tax rate is 8.5 percent, which, combined with cantonal taxes, can reach 24 percent. The overall tax burden is 28.5 percent of GDP. Government spending accounts for 33.8 percent of the economy.

Regulatory EfficiencyView Methodology

The efficient regulatory framework strongly facilitates entrepreneurial activity, allowing business formation and operation to be dynamic. The government generally takes a hands-off approach in sectors dominated by small businesses. Overall labor regulations are relatively flexible, and the non-salary cost of hiring a worker is moderate. Proportionately, Switzerland has some of the world’s highest agricultural subsidies.

Open MarketsView Methodology

Switzerland has a 0 percent average tariff rate. Some non-tariff barriers impede agricultural imports. Foreign investment is not screened, and the government generally treats foreign and domestic investors equally. As a leading financial center, the highly developed financial sector provides a wide range of financing instruments for foreign and domestic investors. Despite the challenging external environment, banks remain well-capitalized.

Country's Score Over Time

Bar Graph of Switzerland Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Switzerland to other economic country groups

Regional Ranking

rank country overall change
1Switzerland81.60.6
2Ireland76.20.5
3Denmark76.10.0
4Estonia75.90.6
5United Kingdom74.90.1
6The Netherlands74.20.7
7Luxembourg74.20.0
8Germany73.40.6
9Finland73.4-0.6
10Sweden73.10.2
11Lithuania730.9
12Georgia72.60.4
13Iceland72.40.3
14Austria72.40.6
15Czech Republic72.21.3
16Norway70.90.4
17Belgium69.90.7
18Armenia68.9-0.5
19Latvia68.72.2
20Macedonia68.60.4
21Cyprus67.6-1.4
22Spain67.2-0.8
23Poland671.0
24Hungary 67-0.3
25Albania66.91.7
26Slovakia66.4-2.3
27Malta66.4-1.1
28Bulgaria65.70.7
29Romania65.50.4
30Turkey64.92.0
31Montenegro63.61.0
32Portugal63.50.4
33France63.5-0.6
34Slovenia62.71.0
35Italy60.90.3
36Croatia60.4-0.9
37Serbia 59.40.8
38Bosnia and Herzegovina58.41.1
39Moldova57.31.8
40Greece55.70.3
41Russia51.90.8
42Belarus50.12.1
43Ukraine49.33.0
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