Switzerland and Liechtenste in WT/TPR/S/208/Rev.1 
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I. ECONOMIC ENVIRONMENT 
(1) M AJOR FEATURES OF THE ECONOMY  
1. Switzerland and Liechtenstein are neighbouri ng countries in the heart of Europe, with 
territory of 41,285 km2 and 160 km2, and population of 7.6 million and 35,400, respectively, in 2007.  
The customs and monetary unions between Switzer land and Liechtenstein ha ve contributed to the 
high integration of their economies (Chapter II(2)(i)).   Further, unfavourable topography for farming 
and limited natural resources have led to similar stra tegies in areas such as manufacturing.  External 
trade, comfortably the equivalent of 100% of GDP (section (3)), is central to both countries, as is 
access to markets. 
2. Since their last TPR, the economies of Switzer land and Liechtenstein have grown on average 
by 2.7% and 2.2%, respectively.  They are among the wealthiest countries in the world, with high GDP per capita (Table I.1).  In 2006, the World Bank ranked Liechtenstein third and Switzerland 
seventh in the world according to  their gross national income (GNI) per capita at purchasing power 
parity (PPP).
1   
Table I.1 
Switzerland and Lichtenstein at a glance, 2006 and 2005 
 Switzerland 
2006 Liechtenstein 
2005 
Area (km2) 41,285 160 
Population ('000) 7,509.0 35.4 
GDP (US$ million) 406,206 3,583  
GNI per capita ("international" $) 38,180 44,260a 
Share of GDP at current prices (per cent)   
Agriculture, hunting, forestry, and fishing 1.1 1.1 
Industry 26.0 39.0 
Mining and quarrying 0.2 .. 
Manufacturing 18.7 .. 
Water and electricity 1.9 .. 
Construction 5.2 .. 
Commerce and repair 12.4 .. 
Services 54.5 59.9 
Hotels and restaurants 2.2 .. 
Transport  3.3 .. 
Financial intermediation 11.8 29.0 
Post and telecommunications 2.7 .. 
Real estate, R&D, and business activities 10.0 .. 
Public administration, education,  health, community, social, and 
personal services activities 10.2 .. 
Education 0.5 .. 
Health and social activities 5.9 .. 
Other personal, domestic, and community services  2.1 .. 
Renting of immovable property (households) 5.8 .. 
.. Not available. 
a In 2006. 
Source:   World Bank online information, "GNI per cap ita 2006:  Atlas method and PPP".  Viewed at:  
http://siteresources.worldbank.org/DATASTATISTIC S/Resources/GNIPC.pdf;  United Nations online 
information, "Switzerland".  View ed at:  http://data.un.org/Country Profile.aspx?crName=Switzerland;  
United Nations online information, "Lie chtenstein".  Viewed at:  http://d ata.un.org/CountryProf ile.aspx?crName= 
Liechtenstein;  and information provided by  the Swiss and Liechtenstein authorities. 
                                                      
1 World Bank online information, "GNI per capita 2006:  Atlas method and PPP".  Viewed at:  
http://siteresources.worldbank.org/DAT ASTATISTICS/Resources/GNIPC.pdf. WT/TPR/S/208/Rev.1 Trade Policy Review 
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3. The economies of Switzerland and Liechtenste in are dominated by manufacturing and 
services.  Their manufacturing sectors are largely specialized in the production of high-technology (capital-intensive) goods (Chapter IV(4)), reflectin g their comparative advantages.  Research and 
development (R&D) is one of the driving forces of  manufacturing, notably in Liechtenstein, which 
spends a relatively high share of GDP (higher th an any OECD countries) on R&D in the sector 
(around 7% of GDP in 2004).  Manufacturing accounts for close to one fifth of GDP and slightly above one fifth of total employment in Switzerla nd;  and close to 40% of GDP and 47% of total 
employment in Liechtenstein (section (3)).  Due to  the nature of the products, their export demand is 
price inelastic.   
4. The services sector is the main employer in both Switzerland and Liechtenstein, with close to 
75% and 53% of total employment respectively;  it contributes slightly over 70% of GDP in Switzerland and slightly over half of GDP in Liecht enstein.  Financial services represent the most 
important branch of the sector.  The factors behind the development of financial services in Switzerland and Liechtenstein are, inter alia , political and social stability, the world-wide confidence 
in the Swiss franc resulting from prudent monetary  policy by the Swiss National Bank (SNB), as well 
as the tradition of banking secrecy (Chapter IV(5)(ii )(a)).  Switzerland and Liechtenstein are both net 
exporters of services.  However, high production co sts and low productivity growth (see below) have 
curtailed the development of branches such as touris m and contributed to maintaining high prices (by 
international comparison).  
5. Agriculture contributes some 1.1% to GDP in both countries and 3.8% and 1.3% to total 
employment in Switzerland and Liechtenstein, respectively.  The sector has remained highly 
protected.  This has contributed to maintaining domestic prices of agricultural (and food) products 
high by international comparison, despite the re forms under way in the sector (Chapter IV(2)). 
6. Under the 1980 Monetary Union Arrangement with Liechtenstein, Switzerland formulates 
monetary policy for both countries and the Swi ss franc is also legal tender in Liechtenstein.
2  T h e  
exchange rate is market determined.  Foreign ex change reserves are sufficiently high, leaving the 
SNB enough leeway to intervene, if  necessary, to stabilize the currenc y.  However, in practice, the 
SNB has not intervened in the ex change market unilaterally sin ce March 1992, and together with 
other central banks since May 1995.  In March 2008,  foreign currency reserves were Sw F 46.3 billion 
(equivalent to 11.1 months of pr ojected goods imports);  official reserve assets and other foreign 
currency assets (including gold3) were Sw F 80.8 billion. 
(2) RECENT ECONOMIC DEVELOPMENTS  
7. Since the last TPR of Switzerland and Liechte nstein in 2004, the Swiss economy has been 
growing at a rate above the euro-zone average (Tab le I.2), recovering from its persistent low growth 
since the early 1990s.  GDP growth was at its highest in 2006 (3.5%) and 2007 (3.1%), driven by exports (section (3)) and private consumption.  It is  nevertheless expected to fall below 2% in 2008 
and even further in 2009 (section (4)). 
                                                     
 
2 Switzerland accepted the obligations  of Article VIII of the Agreemen t of the International Monetary 
Fund (IMF) on 29 May 1992.  In case of disturbances in the capital market, a permit may be required by the Federal Government for outward capital transfers such as bond issues.  Certain limitations apply to foreign 
investment in the insurance branch (Chapter IV(5)(ii)(b)). 
3 As a result of the elimination of the formal legal commitment to the gold standard in 1999, the SNB 
gradually sold half of its gold reserves (around 1,300 tonnes) between May 2000 and March 2005. Switzerland and Liechtenste in WT/TPR/S/208/Rev.1 
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Table I.2 
Selected macroeconom ic indicators, 2003-08 
  2003 2004 2005 2006 2007 2008a 
Miscellaneous Percentage change, unless otherwise indicated  
Real GDP at market prices  -0.2 2.5 2.5 3.5 3.1 1.9 
Inflation (CPI, May 2000 = 100)  102.6  103.4  104.7  105.8  106.5  108.3 
Time deposit at big banks (3-months)  0.21 0.13 0.28 0.96 1.95 .. 
Unemployment rate (%)  3.7 3.9 3.8 3.3 2.8 2.5 
Sectoral shares of real GDP  Percentage 
Agriculture, hunting, fishing, and forestry 1.3 1.4 1.3 1.2 1.1 .. 
Mining and quarrying 0.2 0.2 0.2 0.2 0.2 .. 
Manufacturing 18.2 18.1 18.3 19.1 19.0 .. 
Electricity, gas, and water supply 2.1 2.0 2.0 2.1 2.1 .. 
Construction 5.4 5.3 5.3 5.1 5.0 .. 
Services, out of which: 72.9 73.1 72.9 72.3 72.6 .. 
Wholesale and retail trade;  repair of motor vehicles, 
motorcycles, and personal and household goods 12.7 12.6 12.3 12.1 12.2 .. 
Transport, storage, and communication 6.4 6.6 6.6 6.5 6.7 .. 
Financial intermediation 11.0 11.4 11.8 12.1 12.7 .. 
Real estate, renting, and business activities 9.2 9.4 9.4 9.5 9.4 .. 
Public administration and defence;  compulsory social 
security 10.4 10.3 10.1 9.7 9.5 .. 
National accounts Per cent of GDP 
Final consumption expenditure 72.8 72.0 71.4 69.8 68.9  68.7 
Household and NPISH final consumption expenditure 61.0 60.4 60.0 58.9 58.3  58.2 
Final consumption expenditure of general government 11.8 11.6 11.4 10.9 10.6  10.5 
Gross fixed capital formation 21.2 21.6 21.9 22.1 22.0  21.3 
Exports of goods and services 45.8 48.2 50.5 53.6 57.1  54.4 
Imports of goods and services 41.1 43.0 44.8 46.0 47.0  44.3 
Monetary aggregates (end period) Percentage change 
Money supply (M1) 21.9 5.5 -1.5 -0.6 -4.7 ..  
Money supply (M2) 17.4 4.3 -0.8 -2.0 -6.4 ..  
M3 8.3 3.2 4.2 2.5 2.0 ..  
Exchange rate       
US$ in Sw F (annual average) 1.35 1.24 1.25 1.25 1.20 ..  
€ in Sw F (annual average) 1.52 1.54 1.55 1.57 1.64 ..  
Real effective exchange rate (January 1999 = 100) 101.3 100.5 99.2 97.1 93.8 ..  
Nominal effective exchange rate (January 1999 = 100) 106.8 107.2 106.7 105.4 102.8 ..  
 Per cent of GDP, unless otherwise indicated 
General government (Confederation, cantons, and 
communes) fiscal stance  
Total revenue 29.7 29.7 30.5 31.0 30.7 29.5 
Tax revenue 21.6 21.6 22.0 22.4 22.5 21.5 
Other revenue 8.1 8.1 8.5 8.6 8.2 8.0 
Total expenditure 31.0 30.7 30.2 29.1 28.5 30.0 
Recurrent expenditure 27.4 27.2 26.9 .. .. .. 
Capital expenditure 3.6 3.4 3.3 .. .. .. 
Overall balance (excl. social security) -1.4 -0.9 0.3 1.9 2.1 -1.1 
Confederation -0.9 -0.8 0.1 1.1 0.9 -0.4 
Cantons -0.5 0.2 0.1 0.4 0.7 -0.3 
Communes -0.0 0.1 0.2 0.4 0.5 -0.3 
Overall balance (incl. social security) -1.4 -1.2 0.1 1.9 2.2 -1.0 
Overall indebtedness ratio 55.0 54.6 52.3 47.7 44.2 43.6 
Confederation 28.3 28.1 28.1 25.4 23.9 23.8 
Cantons 17.8 17.8 15.8 12.9 11.7 11.5 
Communes 8.9 8.7 8.3 9.4 8.5 8.2 
Table II.2 (cont'd) WT/TPR/S/208/Rev.1 Trade Policy Review 
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  2003 2004 2005 2006 2007 2008a 
Saving and investment        
Gross national savings .. 34.0 34.9 36.9 38.6 36.6 
Gross national investment 20.9 21.0 21.4 22.2 21.8 22.5 
External sector       
Current account  12.8 12.9 13.6 14.5 13.3 .. 
Merchandise trade account 1.0 1.5 0.6 1.0 1.8  .. 
Special tradeb, net 1.6 2.1 1.7 2.4 2.7  .. 
Value of exports 31.0 32.4 33.9 36.4 38.6  .. 
Value of imports -29.4 -30.4 -32.2 -34.0 -35.8   .. 
Other tradec, net -0.6 -0.6 -1.1 -1.4 -0.9 .. 
Services account 6.1 6.2 6.8 7.8 8.6 .. 
Labour and investment income account 7.4 7.0 9.1 8.1 5.1  .. 
Labour -2.2 -2.2 -2.2 -2.3 -2.4  .. 
Investment, of which: 9.7 9.2 11.4 10.4 7.5  .. 
Portfolio 2.6 2.5 2.7 2.8 3.2  .. 
Direct investment 6.7 6.5 8.7 7.9 4.7  .. 
Current transfers, net -1 .7 -1.7 -3.2 -2.7 -2.4  .. 
Capital transfers, net -0.2 -0.4 -0.2 -0.7 -0.5 .. 
Financial account, net -8.0 -15.6 -18.5 -18.2 -9.4  .. 
Direct investment, net 0.3 -7.0 -14.3 -10.9 -2.0  .. 
Official reserves (end of period - US$ billion) 47.7 55.5 36.3 38.1 42.7 .. 
In months of projected imports of goods and non-factor services, 
c.i.f. 4.5 4.4 5.1 4.8 5.2 .. 
Total external debt (Sw F billion) 992.8 1,024.9 1,258.9 1,342.6 1,716.7 .. 
Export volume (percentage change) of goodsd 0.5 7.3 6.5 11.3 8.4 2.5 
Import volume (percentage change) of goodsd  2.4 5.9 5.3 7.4 6.4 2.5 
.. Not available. 
a  Forecast. 
b Includes electrical energy, as well as processing of goods for foreign account, processing abroad for domestic account, and  
 returned goods. 
c Mainly valuables (precious metals, ge mstones, objets d'art, and antiques).  
d  Without valuables. 
Source:   Swiss National Bank online information, "Activities of th e Swiss National Bank in the area of statistics".  Viewed 
at:  http://www.snb.ch/en /iabout/stat;  Office fédéral de  la statistique online informa tion, "Indices des prix à la 
consommation:  indicateurs:   moyenne annuelle".  Viewed at: http:// www.bfs.admin.ch/bfs/por tal/fr/index/themen/ 
05/02/blank/key/jahresdurchschn itte.html;  Federal Department of Finance (2008), Comptes des administrations 
publiques , 10 March.  Viewed at:  http://www.efd. admin.ch/dokumentation/zahlen/00575/00716/00931/ 
index.html?lang=fr;  IMF (2007), Switzerland:  Staff Report for the 2007 Article IV Consultation , 16 April.  
Viewed at:  http://www.imf.org/extern al/pubs/ft/scr/2007/cr07186.pdf;  IMF (2008), Switzerland:  Staff Report for 
the 2008 Article IV Consultation , 29 April.  Viewed at: http://www.imf.org/ 
external/pubs/ft/scr/2008/cr08170.pdf;  Eurost at online information.  Viewed at:  http://epp.eurostat .ec.europa.eu/;  
and information provided by  the Swiss authorities. 
8. Demand for Swiss exports has been growing steadily during the period under review, despite 
the slower growth in the main export markets (sec tion (3)(i)).  Private consumption has been growing 
as a result of improving consumer confidence and falling unemployment.  Following Switzerland's good economic performance, the unemployment rate has decreased gradually, to 2.4% in early 2008 
(from its peak of 3.9% in 2004);  it is expected  to decrease further during 2008 due to the high 
demand for labour.
4  Wage growth has been contained by foreign labour inflows.  In 2007, foreign 
workers represented around 26% of total employment in Switzerland.  In general, the unemployment 
rate follows Switzerland's economic cycle quite cl osely, reflecting relatively more flexible labour 
legislation than in neighbouring countries.5 
                                                      
4 SNB Press Release, "Monetary policy asse ssment of 13 March 2008".  Viewed at:  
http://www.snb.ch/en/mmr/reference/pr e_20080313/source/pre_20080313.en.pdf. 
5 Economist Intelligence Unit (2007). Switzerland and Liechtenste in WT/TPR/S/208/Rev.1 
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9. Labour productivity rose at an average annual ra te of 1.1% between 2000 and 2007, slightly 
below the EC(15) average (1.2%).  Hampered by weaker performance of sectors that are sheltered 
from international competition, notably  the services sector (Chapter IV(5))6, labour productivity 
nevertheless remained below that of many high-income OECD countries.7  The lower productivity is 
also be partly because the Swiss labour market is more socially inclusive, with the standardized 
employment rate (of people of 15 years and above ) as high as 67.6% in 2007 and net employment rate 
(of people aged 15 to 64) of 81.6%.  This is relatively high by European standards. 
10. Despite the strong economic growth, depreciation of Swiss franc vis-à-vis  the euro8, and 
increasingly high energy prices, inflation has genera lly remained below the 2% ceiling set by the SNB 
for price stability purposes (see below) (Table I.2) .  However, due to the surge in energy and 
commodity prices, CPI inflation was above 2% during the first eight months of 2008.   
11. Economic growth in Switzerland has been suppor ted by the "growth package" announced by 
the Federal Council in February 2004.  This cont ained reform measures for the 2003-07 legislative 
term, aiming at returning Switzerland to the growth path.  The package was building on the results of 
the "revitalisation programme" adopted in 1992.9  It included measures that sought to:  intensify 
competition in the domestic market;  pursue Swi ss economic integration into the world economy;  
reduce the tax burden and optimize government activities;   sustain high levels of employment;  ensure 
a competitive education system;  and develop legi slation that promotes sound business.  Among the 
key elements, has been the implementation of th e free movement of labour between Switzerland and 
the EC, and its gradual extension to new EC memb er states, as well as the revision of taxation (of 
companies and households, and simplification of VAT) .  Other measures included the revision of the 
Federal Law on the internal market (Chapter III(4)( iii)) and of the legal framework for enterprises 
(Chapter II(5)(i)), a new law on electricity (Chapter  IV(3)(iv)), and continuing the reform of the 
agriculture sector.  However, the revision of fede ral legislation on government procurement has been 
postponed (Chapter III(2)(xi)). 
12. In Liechtenstein, after a temporary slowdown during 2001-03, the economy started to recover 
at growth rates comparable to those in Switzerland.  The unemployment rate has been decreasing 
since 2004, and reached 2.9% in 2007.  In 2006, foreign workers represented around 68% of total 
employment in Liechtenstein, and almost half of the labour force was living abroad, mainly in the 
neighbouring regions of Switzerland and Austria. 
13. In order to contain public spending, a debt-b rake rule has been applied at the Swiss 
Confederation level since 2003.10  According to this rule, over a business cycle, the Confederation's 
spending cannot exceed its tax revenues.  It theref ore allows cyclical deficits, but foresees the 
elimination of structural deficits.  However, this rule does not appl y to the cantons, and does not cover 
extraordinary spending nor the social security syst em.  The latter presents a challenge for the future, 
given the ageing population of Switzerland.  The cantons set their own fiscal rules, and are not 
supervised by the Confederation;  they may also set the rules for communes.  Some (but not all) 
cantons nevertheless apply their own debt brake-ru les, which vary substantially across cantons.   
                                                      
6 OECD (2007a). 
7 In 2007, on the basis of labour productivity (measured by GDP/hour), Switzerland ranked 15th after 
Luxembourg, Norway, Austria, Belgium, the Netherlands, the United States, France, Germany, Ireland, the United Kingdom, Italy, Sweden, Denmark, and Finland (The Conference Board, 2008). 
8 Carry trades seem to have contributed si gnificantly to the Swiss franc's weakness. 
9 The "revitalisation programme" was adopted after the rejection of membership of the European 
Economic Area (EEA) in 1992.  It contained measures to enhance economic growth (by, among other things, 
reducing barriers to trade w ithin Switzerland through strengthened competition policy). 
10 The debt-brake rule wa s approved by a popular vote on 2 Decembe r 2001.  The rule was first applied 
in 2003, and subsequently amended. WT/TPR/S/208/Rev.1 Trade Policy Review 
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14. During the period under review, the 2003 and the 2004 Budgetary Relief programmes were 
implemented to eliminate structural deficits.  The 2003 programme (introduced gradually between 
2004 and 2006) focused mainly on expenditure cuts , but also foresaw increases in revenue through 
higher taxes on tobacco and some higher administrative fees.  Like the 2003 Relief Programme, the 
2004 programme, which became effective in January  2006, also focused mainly on expenses.  A 
complementary measure, the Programme d'abandon de tâches  (PAT), was also introduced in 2004 
with the aim of reducing the Confederation budget by around Sw F 200 million by 2008;  the PAT is 
concentrated on administrative tasks. 
15. As a result, the Confederation budget deficit (excluding extraordinary expenditures) turned 
into surplus in 2005 and, supported by surpluses at the cantonal and communal levels, the overall 
budget surplus reached 1.9% of GDP in 2006 and in creased further in 2007 (Table I.2).  The good 
2007 budgetary performance at the Confederation leve l was mainly due to the increase in revenues as 
a result of good economic conditions (nominal GDP gr ew by 4.5%), but also to expenses below the 
budgeted level and at a lower rate than the GDP growth.  This lowered the overall level of 
indebtedness, including that of the Confederation (Table I.2).   
16. The Confederation budget approved by Parliament  for 2008 shows a surplus (on the regular 
account) estimated at Sw F 1.2 billion;  however, ex traordinary expenses of some Sw F 5.2 billion are 
to turn the surplus into a budget deficit of nearly  Sw F 4 billion, increasing the Confederation debt to 
Sw F 125 billion.  The budget surpluses foreseen in the 2009-11 finance plan ( Plan financier       
2009-2011 de la législature ) are expected to cover the Sw F 4 billion;  these surpluses are based on 
the assumption that nominal growth of GDP will aver age 3.1% until 2011.  The Confederation is also 
to reduce its spending.  These forecasts also assume  an increase of VAT and the capacity-linked levy 
on heavy goods vehicles (LSVA), and take into account the new CO 2 tax, introduced in 2008 
(Chapter III(2)(v)).  A proposal has also been tabl ed to introduce a comple mentary provision to the 
debt-brake rule, with a view to controlli ng the extraordinary component of the budget.11   
17. In order to reduce the financial differenc es between communes, the "reform of the 
organization of financial equali sation and allocation of tasks between the confederation and the 
cantons" (RET) was introduced, effective 1 January 2008.  It aims to change the structure of 
expenditures and reduce financial differences origina ting in external factors (such as topography) or 
special financial burdens (such as expenditures on ho spitals, schools, or places of culture) that benefit 
also neighbouring cantons. 
18. Tax revenue (including municipal taxes) in Liechtenstein, after falling in 2002 and 2003, 
increased from Sw F 664.1 million in 2004 to 769.9 milli on in 2006.  The biggest share of the revenue 
was provided by the value-added tax, followed by capital and earnings tax, and property and income 
tax.  The current account of the national budget w as positive during the period under review, with the 
exception of 2004, when it showed a deficit of Sw F 11.7 million (approximately 0.3% of GDP), 
caused by stock exchange movements;  it showed a surplus of Sw F 69.5 million in 2007 after an 
extraordinary high surplus of Sw F 367.6 million in  2006 (due to the sale of shares of Liechtenstein 
Landesbank).  Liechtenstein has no external debt. 
19. Under the Federal Law on the Swiss National Bank (RS 951.11), the main objective of the 
monetary policy implemented by th e SNB continues to be price stab ility, expressed in terms of the 
headline consumer price index (CPI), i.e. a CPI inflat ion rate of less than 2% , over the medium term.  
Monetary policy decisions are based on inflation fo recasts over a three-year period;  the policy allows 
short-term inflation over the target  level.  The SNB sets a target band for the three-month Swiss franc 
                                                      
11 This proposal is expected to be submitted for consultations in 2008, and enter into force in 2011. Switzerland and Liechtenste in WT/TPR/S/208/Rev.1 
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Libor (in general, a spread of one percentage point),  and announces the target rate for the Libor within 
this band.  It regulates the three-month Libor i ndirectly by influencing the Swiss money market 
conditions through, inter alia , its main financing and liquidity -absorbing operations, i.e. repo 
transactions.  The SNB also influences money market  rates through the volume of sight deposits that 
commercial banks hold at the SNB.  In addition, it uses fine-tuning operations (via bilateral repo 
transactions) to offset the unwanted impact of ex ternal factors on liquidity supply and to smooth 
sudden fluctuations in shor t-term money market rates.12 
20. In June 2004, in the context of improved econom ic prospects, the SNB increased its target 
band for the three-month Swiss franc Libor by 0.25 pe rcentage points, to 0.0-1.0% (with the objective 
of keeping the three-month Libor around 0.5%).  It gradually increased the band throughout the period 
under review.  The latest adjustment took place in  September 2007, when the target band was brought 
to its current level of 2.25%-3.25%, with the targ et three-month Libor around 2.75%.  This latest 
adjustment was aimed at bringing down the Libor  from its 2.9% level that resulted from the 2007 
turmoil on the financial market.  Since then, th e three-month Libor has been at around 2.75%. 
(3) DEVELOPMENTS IN TRADE AND INVESTMENT  
21. Trade is an important driving force of the economies of Switzerland and Liechtenstein, the 
share of trade in goods and services in GDP exce eding 100%.  Given their degree of openness, both 
countries remain sensitive to developments in the global economy. 
22. Switzerland's current account has been traditionall y in surplus (Tables I.2 and I.3).  Its main 
driving force has been investme nt income, followed by trade in services.  The high level of 
investment income results from increasing profits of Swiss companies generated by their growing 
direct investment abroad;  a rising proportion of these profits comes from foreign subsidiaries.  The 
level of net foreign assets (e.g. 141.5% of GDP in 2007) is among the highest in the OECD countries.  
The services surplus is supported by earning s from banking and insurance activities.  The 
merchandise trade surplus remains small and relativel y flat, at about 1.2% of GDP;  however, it rose 
to 1.9% of GDP in 2007, reflecting strong economic  performance in Switzerland and abroad, and a 
weaker Swiss franc vis-à-vis the euro.  Exports of goods and services accounted for 57.1% of 
Switzerland's GDP in 2007.  Nevertheless, the cu rrent account surplus (percentage of GDP) is 
expected to decline in 2008, due to lower investme nt income stemming from lo wer yields on foreign 
assets, as well as lower merchandise exports, and especially, lower financial service income.13 
23. The current account surplus largely reflects stru ctural factors, such as the country's high per 
capita income, high national saving rate (partly b ecause of the well developed system of mandatory 
retirement savings)14, and the role of Switzerland as a majo r financial centre.  In addition, the 
specificities of the accounting system for inv estment flows tend to overstate the surplus.15  
Nevertheless, the surplus remains substantial despite these accounting specificities;  according to the 
SNB, the surplus in 2006 would have been around 11% of GDP (instead of 14.5%). 
                                                      
12 SNB (2007b). 
13 IMF (2008b). 
14 In 2004, pension funds (together with life insurance investments) held assets worth more than 150% 
of GDP, the highest GDP share in the OECD (OECD, 2007a).   
15 Most of the earnings of Swiss multinationals are ke pt as retained earnings, rather than paid-out in 
dividends.  According to IMF balance- of-payments accounting rules, these should be tr eated as income inflows, 
with counterpart foreign direct investment (FDI) outflo ws through the cap ital account.  Theref ore, even though 
no money crosses borders, the capital a nd current accounts are infl ated.  Simultaneously, foreigners hold Swiss 
assets mainly as stocks, and the retained earnings of  the underlying companies are not treated as income 
outflows.  This asymmetrical treatment is estimated to  overstate the current account surplus by 4-5 percentage 
points of GDP (IMF, 2008b). WT/TPR/S/208/Rev.1 Trade Policy Review 
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Table I.3 
Balance of paymentsa, 2003-07 
(Sw F billion) 
 2003 2004 2005 2006b 2007c 
Current account, net 56.2 58.3 63.0 70.6 68.3 
Goods, net 4.3 6.7 3.0 5.1 9.4 
Special traded, net 6.9 9.3 7.9 12.1 14.0 
  Receipts 135.5 146.3 157.0 177.5 197.5 
  Expenses  -128.6 -137.0 -149.1 -165.4 -183.6 
Other trade, net -2.6 -2.6 -4.9 -7.0 -4.6 
Services, net 26.9 28.2 31.5 38.0 44.1 
  Tourism, net 2.3 1.9 1.5 2.0 2.3 
    Receipts 11.6 11.9 12.5 13.5 14.6 
    Expenses -9.3 -10.1 -11.0 -11.6 -12.3 
  Banking services, net 12.6 13.2 16.2 18.7 22.4 
    Receipts 13.5 14.2 17.5 20.3 24.6 
    Expenses -0.9 -1.1 -1.3 -1.6 -2.1 
  Other services, net 11.9 13.1 13.8 17.3 19.4 
Labour income and investment income, net 32.6 31.4 42.3 39.3 26.1 
  Labour income, net -9.7 -10.0 -10.4 -11.2 -12.4 
    Receipts 2.1 2.1 2.0 2.1 2.1 
    Expenses -11.7 -12.2 -12.4 -13.4 -14.5 
  Investment income, net 42.3 41.5 52.7 50.5 38.5 
    Receipts 82.4 86.7 125.7 134.2 154.3 
      Portfolio investment 22.0 23.2 26.5 30.8 37.0 
      Direct investment 43.6 48.9 76.5 68.4 64.0 
      Other investment income 16.8 14.6 22.7 35.0 53.2 
    Expenses -40.2 -45.2 -73.0 -83.7 -115.8 
      Portfolio investment -10.9 -11.9 -13.8 -16.9 -20.6 
      Direct investment -14.5 -19.5 -36.1 -30.2 -40.0 
      Other investment income -14.9 -13.9 -23.1 -36.6 -55.2 
Current transfers, net -7.6 -8.1 -13.8 -11.7 -11.3 
Capital transfers, net -0.9 -1.8 -0.8 -3.5 -2.8 
Financial account, net -35.2 -70.3 -85.8 -88.4 -48.1 
Direct investment, net 1.4 -31.5 -66.1 -53.0 -10.3 
  Swiss direct investment abroad -20.8 -32.7 -64.4 -94.3 -56.7 
    Equity capital -5.6 -11.6 -22.7 -62.4 -29.5 
    Reinvested earnings -16.1 -21.2 -41.0 -25.9 -15.1 
    Other capital 0.9 0.1 -0.7 -6.0 -12.1 
  Foreign direct investment in  Switzerland 22.2 1.2 -1.7 41.3 46.4 
    Equity capital 11.7 -3.2 -0.5 21.5 23.2 
    Reinvested earnings 3.8 8.4 -2.8 16.4 22.3 
    Other capital 6.8 -4.0 1.6 3.4 0.9 
Portfolio investment, net -47.0 -49.7 -59.2 -53.5 -23.3 
  Swiss portfolio investment abroad -44.5 -53.3 -66.3 -53.6 -25.0 
    Debt securities -41. 6 -39.2 -44.3 -36.1 -18.7 
      Bonds and notes -32.9 -48.5 -48.5 -46.4 -33.8 
      Money market instruments -8.7 9.3 4.2 10.3 15.1 
    Equity securities -2 .9 -14.1 -22. 0 -17.5 -6.3 
  Foreign portfolio investment in Switzerland -2.5 3.6 7.2 0.1 1.7 
    Debt securities 3.7 7.0 2.1 -0.6 1.1 
      Bonds and notes 2.2 5.3 -1.5 -1.0 -0.6 
      Money market instruments 1.5 1.8 3.5 0.3 1.7 
    Equity securities -6.2 -3.4 5.1 0.7 0.6 
Derivatives and structured products, net 0.0 0.0 0.0 -3.7 -12.8 
Other investment, net 14.9 12.8 16.8 22.2 2.2 
  Commercial bank lending, net -6.8 16.9 1.9 23.5 7.1 
    Claims abroad -14.0 -16.9 -73.5 -33.4 -290.9 
    Claims against banks -4.3 19.6 -71.4 -14.5 -241.5 
    Other claims -9.7 -36.5 -2.0 -18.8 -49.4 
Table I.3 (cont'd) Switzerland and Liechtenste in WT/TPR/S/208/Rev.1 
 Page 9 
 
 
 2003 2004 2005 2006b 2007c 
  Liabilities abroad 7.2 33.8 75. 4 56.9 298.0 
    Liabilities towards ba nks -12.9 29.2 72.4 53.6 292.3 
    Other liabilities 20.1 4.7 3.0 3.3 5.8 
Corporate lendinge, net 6.1 -12.7 16.9 15.6 3.3 
  Claims abroad -2.8 -13.0 3.4 3.8 -40.6 
  Liabilities abroad 8.9 0.3 13. 5 11.9 43.8 
Government lending, net -0.1 0.4 0.1 0.5 3.1 
National Bank lending, net -0.1 -0.3 -1.2 0.5 0.0 
Other, net 15.8 8.5 -0.9 -17.9 -11.2 
Reserve assets, total -4.5 -1.9 22.7 -0.4 -4.1 
Net errors and omissions -20.1 13.8 23.6 21.3 -17.4 
a The minus (-) sign indicates a surplus of  imports over exports in the current account , and an export of capital in the other items. 
b Provisional. 
c Estimates. 
d As of 2002, special trade has also included electrical energy .  In addition, it covers processing of goods for foreign accoun t, 
processing abroad for domestic account, and returned goods, a ll of which were previously included under other trade. 
e Intra-group lending is shown under direct investment. 
Source:   Swiss National Bank (2007), Swiss Balance of Payments 2006 , September.  Viewed at: http://www.snb.ch/ 
 en/mmr/reference/balpay_2006/source/balpay _2006.en.pdf;  Swiss National Bank (2008), Swiss Balance of 
 Payments Q4 2007 and Review of Year 2007 , March.  Viewed at: http://www.snb.ch/en/mmr/reference/ 
 balpay_2007_q4/source/balpay_2007_q4.en.pdf;  and info rmation provided by the Swiss authorities.  
(i) Trade in goods and services 
(a) Switzerland 
24. The total value of merchandise imports in creased by 43.4% between  2003 and 2007, boosted 
by the revival of economic growth.  However, the higher world prices for energy and raw materials, 
and for equipment and consumer goods, tend to infl ate the trade figures.  In 2007, for example, 
imports (excluding precious metals, gemstones, objet s d'art, and antiques) were estimated to have 
increased by 10.9% in nominal terms, while in real terms the growth was 6.7%. 
25. Imports are dominated by manufactures, which account for around 80% of the total value 
(Table AI.1 and Chart I.1).  Machinery and transpor t equipment continue to be the main import items, 
followed by chemicals.  According to Swiss customs statistics, in value terms, imports of "metals and 
metal manufactures" (excluding objets d'art and antiq ues, which increased by 96%) increased the most 
(88.7%) between 2003-07, followed by energy produc ts (88.1%), and chemical products (50.1%).  
This increase in nominal terms reflects to a large extent the increase in world prices for energy and 
raw materials, notably as Switzerland (and Liechtenste in) imports most of its energy and industrial 
raw materials. 
26. Switzerland remains a net importer of food produc ts.  The share of agricultural products in 
total imports has continued its downw ard trend, reflecting the relatively high border protection for this 
sector (Chapter IV(2)), and a decline in imports of food and agricultural raw materials. 
27. In volume terms, imports of "machines and el ectronic products" increased the most (31.0%) 
between 2003 and 2007, followed by "metals and meta l manufactures" (29.6%), and "leather, rubber, 
and plastics" (25.7%), while those of chemical products grew by 15.4% and imports of energy 
products decreased by 5.7%.   WT/TPR/S/208/Rev.1 Trade Policy Review 
Page 10 
 
 
0%10%20%30%40%50%60%70%80%90%100%
2003 2004 2005 2006 2007Chart I.1
Structure of merchandise trade, 2003-07
(a) Imports (c.i.f.)
(b) Exports (f.o.b.)
Source:     WTO Secretariat estimates, based on UNSD, Comtrade database SITC Rev.3 data.0%10%20%30%40%50%60%70%80%90%100%
2003 2004 2005 2006 2007
Food
Mining
ChemicalsIron and steelOther semi-manufactures
Non-electrical machinery
Electrical machinesTextiles and clothing
Other consumer goods
Other
Transport equipmentFood
Non-ferrous metals
Iron and steelFuelsChemicals
Other semi-manufactures
Non-electrical machineryTransport equipment
Textiles and clothing
Other consumer goods
Electrical machines Other
 Switzerland and Liechtenste in WT/TPR/S/208/Rev.1 
 Page 11 
 
 
28. Merchandise exports increased by 45.9% (in Sw F terms) between 2003 and 2007.  Exports 
growth reached 10% in 2006 and 2007.  Manufactur ed products represent the bulk of merchandise 
exports (some 90%) from Switzerland (Table AI.2 and Chart I.1).  Chemical products continue to be 
the main export item (notably pharmaceutical products , which account for around one quarter of total 
exports), followed by machinery and electronics (mainly industrial machinery), and watches and 
precision instruments.  The share of agricultural pro ducts (including silvicultu re) in total exports has 
increased slightly;  however, it remains under 4% of th e total value of merchandise exports.  In value 
terms, excluding objets d'art and antiques, whic h increased by 86.8%, expor ts of "energy products" 
increased the most (76.0%) between 2003 and 2007, fo llowed by agricultural (including silviculture) 
goods (68.6%), and metals and metal manufactures (55.4%).  
29. In volume terms, exports of agricultural (inc luding silviculture) goods increased the most 
(33.4%) during 2003-07, followed by watches, je wellery and precision instruments (32.3%), and 
vehicles (29.8%), while metals and metal manuf actures grew by 21.8% and "energy products" by 
1.6%.  Exports of agricultural products have be nefited from a boom in th e production of beverages 
following the establishment in Switzerland of the pr oduction centre of a multin ational group, and its 
consequent expansion.  Beverages became th e main single agricultural export item in 2006, 
overtaking cheese and chocolate. 
30. In general, exports benefited from the growth  of the world economy, and sustained demand 
(notably from Germany), as well as from the incr eases in world prices, notably for pharmaceuticals 
(Switzerland's most important single export item), wa tches, and metals.  The low price sensitivity of 
demand for high-value-added goods (such as chem ical and pharmaceutical products, and precision 
instruments) has resulted in lower vulnerability of overall exports to world price fluctuations. 
31. The European Communities (EC) remains by far Switzerland's largest supplier of 
merchandise (around 80% of total imports), and its ma jor destination for exports (around 60% of total 
exports) (Table AI.3 and Chart I.2).  Within the EC , Germany is the main single supplier and the main 
single destination;  the shares of the two other EFT A members remain low;  and the United States is 
the main non-European trading partner.  The share of merchandise impor ts under bilateral and 
regional trade agreements (prefe rential regimes) was around 42% of the total, during 2003-07. 
32. Some changes have taken place regarding exports  destinations of Swiss products.  The EC's 
share has decreased slightly;  this has been mitigat ed by an increase in exports to Russia and Asia 
(mainly China), reflecting the continued geographical diversification of Swiss exports (Table AI.4 and 
Chart I.2).  In general, the destinations for Swi ss merchandise exports are more diversified than the 
sources of its imports.16  Data are not available on merchandi se exports under bilateral and regional 
trade agreements (preferential regimes). 
33. Switzerland has traditionally been a net exporter of services (Table I.2):  it has usually run 
surpluses in all except transport and communication ser vices.  Banking and insurance continue to be 
among the best performing branches:  their net exports reached some Sw F 27.6 billion in 2007, up from Sw F 14.9 billion in 2003.  Net exports of servi ces have contributed, on average, 53% of current 
account surpluses.  The services account surplu s increased by nearly 64% between 2003 and 2007 
despite relatively higher growth of services impor ts compared with exports.  This performance is 
largely attributable to financial services, with higher income from brokers' commissions on stock 
exchange transactions (due mainly to high turn over on the stock market), as well as higher asset 
management and underwriting revenues. 
                                                     
 
16 Since, for statistical purposes, th e country of origin is the country in which the last transformation of 
the good has occurred, products such as petroleum from th e Gulf Region, refined in the Netherlands, constitute 
Swiss imports from an EC country and contribute, theref ore, to underestimation of the share of the non-EC 
countries in total imports. WT/TPR/S/208/Rev.1 Trade Policy Review 
Page 12 
 
 
0% 20% 40% 60% 80% 100%20032004200520062007Chart I.2
Direction of merchandise trade, 2003-07
0% 20% 40% 60% 80% 100%20032004200520062007(a) Imports (c.i.f.)
(b) Exports (f.o.b.)
Source:     WTO Secretariat estimates, based on UNSD, Comtrade database SITC Rev.3 data.Per cent
United States
ItalyGermanyOther America Hong  Kong,  China
OtherOther AsiaAustria
JapanChinaMiddle EastFrance
NetherlandsSpainUnited KingdomUnited States
ItalyGermanyOther AmericaRussian Federation
ChinaAfricaBelgium
SwedenSpainIrelandFrance
United KingdomAustriaNetherlands
JapanSix East Asian 
traders
Other
 Switzerland and Liechtenste in WT/TPR/S/208/Rev.1 
 Page 13 
 
 
(b) Liechtenstein 
34. Liechtenstein's merchandise trade account has been positive throughout the period under 
review, reaching Sw F 1.8 billion in 2007 (up 27.3 % compared with 2003).  Merchandise imports and 
exports have followed similar trends  to those of Switzerland.  Nominal direct imports (i.e. excluding 
imports from Switzerland) increased by 62.1% be tween 2003 and 2007, amounting to Sw F 2.4 billion 
in 2007.  The main imports are machines and elect ronics, followed by metal and metal manufactures.  
Merchandise exports increased by 45.4% over the peri od, reaching Sw F 4.2 billion in 2007.  Growth 
of nominal direct exports (i.e. excluding exports to  Switzerland) has been particularly strong in recent 
years, at 11.6% in 2006 and 16.1% in 2007.  Liechte nstein's main exports are high-tech construction 
products, electronic products, car parts, dental products, and processed agricultural products.   
35. The EC continues to be Liechtenstein's main si ngle supplier, and largest destination for direct 
exports;  in 2007, the EC's shares were 93% a nd 63%, respectively.  The main single sources of 
imports are (after Switzerland) Austria, Germany, It aly, the United States, and France.  Germany is 
the biggest single export destination (after Switzer land), followed by the United States, Austria, 
France, and Italy. 
36. No data are available on Liechtenstein's trade in services. 
(ii) Investment 
37. The high quality of life, highly skilled labour  force, flexible labour laws, reliable 
infrastructure, as well as low level of taxation, are considered to make Switzerland one of the most 
attractive locations for foreign direct investment (FDI) in Europe.17  Together with high wages and 
input prices, these conditions have made Switzerland  a destination for FDI in the services sector as 
well as in high quality manufacturing branches such as advanced electronics, pharmaceuticals, and medical engineering.  Liechtenstein benefits from si milar advantages.  Nevertheless, the small size of 
the two countries and their high production co sts have somehow limited their investment 
opportunities and contributed to maintaining gross fixed capital formation at relatively low levels 
(around 20% of GDP for Switzerland since 1996). 
38. Inward FDI in Switzerland varied considerably during the period under review (Table I.4).  It 
amounted to Sw F 41.3 billion in 2006 and Sw F 46.4 billion in 2007, representing a considerable 
increase over the two previous years, when FDI was unusually low or negative.  The 2006 increase 
was mainly in favour of financial and holding  companies, but also the insurance industry.
18  The stock 
of FDI has been increasing steadily, reaching Sw F 313.1 billion in 2007.   
39. According to the SNB, the withdrawal of FDI from Switzerland in 2005 can be attributed, to a 
large extent, to the "American Jobs Creation Ac t", which granted temporary fiscal incentives to 
U.S. companies, allowing them to transfer rei nvested earnings back to the United States, at a 
privileged tax rate.  Switzerland's overall capital stock in 2005 remained unchanged however, thanks 
to the increase in capital inflows, mainly from the EC.  The low level of FD I in 2004 is attributable 
mainly to capital and loan repayments made by fi nance and holding companies;  this resulted in a 
reduction in the capital stock of finance and hol ding companies for the first time since 1995.19  
According to the SNB, the result for the previous reporting population of 850 companies even showed an outflow of capital amounting to Sw F 5 billion. 
                                                     
 
17 For more details, see Ernst & Young (2006). 
18 The increase of inflows to the insurance sub-sect or was mainly prompted by the acquisition of a 
large insurance company (Winterthur) by foreign investors. 
19 SNB (2005). WT/TPR/S/208/Rev.1 Trade Policy Review 
Page 14 
 
 
Table I.4 
Foreign direct investmenta, 2003-07  
(Sw F billion) 
 Capital flows Capital stock at year-end (book value) 
 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007 
FDI in Switzerland    
B y  c o u n t r y  o f  o r i g i n            
Total 22.22 1.16 -1.68 41.29 46.42 200.67 223.68 224.53 266.05 313.06 
Europe 14.16 -3.92 22.77 36.74 42.25 114.21 130.18 158.52 196.54 .. 
ECb 14.13 -4.03 22.80 36.65 42.81 112.30 128.06 155.52 193.28 .. 
France 0.94 0.78 2.16 13.89 2.68  13.80 16.31 18.14 30.35 .. 
Germany -0.02 -0.29 0.77 1.07 15.39  16.33 18.23 20.96 22.83 .. 
Netherlands 6.02 -2.44 9.10 15.71 13.15  41.84 46.90 55.98 65.98 .. 
Luxembourg 0.31 0.57 -0.28 3.41 2.91  9.21 9.65 11.81 17.32 .. 
Austria -0.01 0.73 9.83 2.53 5.08  0.89 2.31 12.70 17.59 .. 
United Kingdom 1.76 -1.87 1.37 -1.91 0.39  9.76 10.70 13.31 15.21 .. 
Other European countriesc 0.03 0.11 -0.03 0.09 -0.56 1.91 2.12 3.00 3.26 .. 
North America 7.21 7.01 -25.32 4.29 4.18 81.93 89.59 59.65 61.87 .. 
Canada 0.29 0.11 -0.45 0.31 0.96 1.76 1.46 1.19 1.20 .. 
United States 6.92 6.90 -24.86 3.98 3.22 80.17 88.13 58.46 60.67 .. 
Central and South America 0.93 -1.40 0.88 0.14 -0.01 1.95 1.52 3.46 4.34 .. 
Offshore financial centresd 0.94 -1.97 0.65 0.11 0.01 1.65 0.07 1.78 2.74 .. 
Asia, Africa, and Oceania -0.08 -0.52 -0.01 0.12 0.00 2.57 2.40 2.90 3.30 .. 
Israel 0.03 0.03 0.06 0.05 0.04 0.49 0.52 0.62 0.67 .. 
Japan -0.26 -0.23 -0.12 -0.09 0.01 1.10 1.08 1.02 0.94 .. 
By economic activity          . .  
Manufacturing 6.65 3.00 1.04 14.27 24.45 36.52 37.30 37.40 47.72 .. 
Chemicals and plastics 2.52 2.54 0.95 4.72 18.18 15.43 17.46 17.08 22.95 .. 
Metals and machinery 1.80 0.44 -0.12 8.22 4.76 4.93 5.56 6.12 6.84 .. 
Electronics, energy, optical, and 
watchmaking 1.95 0.29 -0.19 1.52 1.37 10.08 9.09 8.64 12.47 .. 
Other manufacturing and 
construction 0.38 -0.27 0.40 -0.20 0.14 6.08 5.20 5.55 5.47 .. 
Services 15.57 -1.84 -2.72 27.01 21.97 164.15 186.38 187.13 218.33 .. 
Trade 4.41 1.77 0.93 1.36 4.28 21.34 31.20 33.52 35.07 .. 
Finance and holding companies 9.01 -4.55 -7.81 13.36 11.56 102.35 110.28 103.89 120.57 .. 
Banks 0.73 0.20 1.26 1.55 2.99 26.54 27.29 29.69 32.06 .. 
Insurance 0.47 -0.11 0.31 13.37 1.97 4.02 5.41 5.79 16.68 .. 
Transportation and communication 0.81 -0.28 1.87 -2.06 1.09 5.82 5.80 7.17 7.25 .. 
Other services 0.15 1.12 0.73 -0.56 0.07 4.08 6.41 7.09 6.69 .. 
Swiss direct investment abroad           
By country of destination           
Total 20.79 32.67 64.38 94.27 56.68 422.24 453.31 562.57 632.18 679.38 
Europe 9.44 14.55 24.65 38.36 34.61 218.50 233.97 283.98 298.17 .. 
ECb 6.52 14.91 20.96 36.21 28.25 181.08 200.96 245.99 261.42 .. 
France -1.87 3.20 1.91 1.62 1.03 20.27 22.55 26.43 30.66 .. 
Germany 0.30 0.10 8.26 8.80 2.15 26.37 24.39 38.55 42.73 .. 
Netherlands 0.58 3.78 8.88 -6.18 -2.95 18.18 20.42 35.44 26.23 .. 
Luxembourg 4.35 -0.30 -3.27 7.78 12.53 20.86 22.28 19.02 25.16 .. 
Austria 0.59 0.63 0.60 1.73 0.15 5.65 5.30 5.30 7.77 .. 
United Kingdom 0.74 4.60 2.64 6.80 8.29 41.98 49.21 55.78 58.31 .. 
Other European countriesc 2.91 -0.36 3.69 2.15 6.36 37.42 33.01 37.99 36.75 .. 
North America 6.77 8.88 22.83 23.25 -4.38 83.33 84.44 123.72 149.92 .. 
Canada 0.35 3.14 6.08 1.91 2.43 2.95 1.03 9.46 17.48 .. 
United States 6.42 5.74 16.75 21.34 -6.81 80.38 83.41 114.26 132.44 .. 
Central and South America 3.75 3.28 7.47 20.37 15.25 74.19 87.36 94.75 113.33 .. 
Offshore financial centresd 3.94 2.08 3.37 15.35 0.92 55.10 69.19 69.01 93.34 .. 
Asia, Africa, and Oceania 0.84 5.96 9.44 12.29 11.19 46.22 47.54 60.14 70.76 .. 
Israel 0.04 0.05 0.08 0.15 0.05 0.21 0.74 0.86 1.01 .. 
Japan -0.17 1.05 0.11 0.64 1.68 7.24 8.07 8.87 10.06 .. 
By economic activitye, f           
Manufacturing 6.43 21.62 27.76 55.82 19.17 142.87 160.44 202.75 255.84 .. 
Textiles and clothing 0.81 -0.06 -1 .68 2.48 4.66 9.44 9.53 7.63 15.92 .. 
Chemicals and plastics 3.24 11.89 20.77 23.20 5.12 62.65 74.91 96.82 120.46 .. 
Table I.4 (cont'd) Switzerland and Liechtenste in WT/TPR/S/208/Rev.1 
 Page 15 
 
 
 Capital flows Capital stock at year-end (book value) 
 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007 
Metals and machinery 1.43 2.05 0.80 9.80 2.66 20.48 23.76 26.44 35.72 .. 
Electronics, energy, optical, and 
watchmaking -3.25 0.84 1.05 3.56 0.04 12.40 11.55 18.14 20.26 .. 
Other manufacturing and 
construction 4.19 6.89 6.83 16.77 6.70 37.90 40.70 53.72 63.49 .. 
Services 14.37 11.05 36.62 38.45 37.51 279.38 292.87 359.82 376.34 .. 
Trade -0.62 1.39 8.26 -3.34 -0.71 10.82 16.20 24.92 21.96 .. 
Finance and holding companies 7.36 1.94 10.44 8.90 17.41 115.14 118.04 153.87 150.00 .. 
Swiss controlled 2.66 -0.31 1.99 3.66 4.66 25.85 26.57 29.80 32.56 .. 
Foreign-controlled 4.70 2.25 8.45 5.25 12.75 89.29 91.46 124.06 117.44 .. 
Banks 6.18 3.23 8.38 21.91 12.19 57.08 59.48 70.04 89.33 .. 
Insurance 1.41 3.82 5.89 8.94 -3.48 82.83 86.59 95.90 96.79 .. 
Transportation and communication -0.54 -0.05 1.32 1.32 7.17 3.85 3.30 4.22 5.69 .. 
Other services 0.58 0.73 2.32 0.72 4.93 9.67 9.26 10.87 12.56 .. 
.. Not available. 
a Since 2006, Liechtenstein has been included in the Swiss statis tics on direct investment.  Previously, direct investments rel ating 
 to companies whose head offices were locat ed in Liechtenstein were in cluded in the statistics only if their parent company's h ead 
 office was located in Switzerland.  The direct invest ment survey now includes co mpanies in Liechtenstein. 
b Until 2003, EC(15);  as of 2004, EC(25);  as of 2007, EC(27). 
c Until 2003, including the Baltic States, Cyprus, Czech Republic, Hungary, Malta, Poland, Slovakia,  and Slovenia;  and until 
 2006, including Bulgaria and Romania. d Anguilla, Antigua and Barbuda, Bahamas,  Barbados, Belize, Bermuda, Cayman Islands, Dominica, Grenada, Jamaica,
 Montserrat, Netherlands Antilles, Panama, St Kitts and Nevi s, St Lucia, St Vincent a nd the Grenadines, Turks and 
 Caicos Islands, Virgin Islands (B ritish), and Virgin Islands (U.S.). 
e The minus (-) sign indicates an outflow of  capital from Switzerland (disinvestment). 
f The "reporting population" expanded from some 850 companies to 1,100 companies in 2004 . 
Source:   Swiss National Bank (2008), Monthly Statistical Bulletin , Volume 83, March.  Viewed at: 
 http://www.snb.ch/en/iabout/stat/statpub/ statmon/stats/statmon;  and inform ation provided by the Swiss and the 
 Liechtenstein authorities.  
40. In 2007, reinvested earnings and equity capital accounted for 48.1% and 50.0% of FDI in 
Switzerland, respectively.  During 2003-07, the services sector (mainly financial services) was the 
major recipient of inward FDI (around 55% of to tal FDI flows).  The main recipients in the 
manufacturing sector were chemicals and plastics, followed by metals and machinery, and electronic, energy, optical, and watchmaking industries.   
41. The EC continues to be the major origin of FDI in Switzerland, accounting for more than 90% 
of the total in 2007.  During the period under re view, the Netherlands has been the largest single 
source, followed by France and Austria.  The Netherlands (like Luxembourg and Austria) serves 
mainly as hub for investments from other countri es (mainly the United Kingdom, the United States, 
and Japan).
20  FDI in the services and manufacturing sectors originates mostly in the EC.   
42. Switzerland is a more important provider than r ecipient of FDI, although, in 2003, inward 
FDI exceptionally exceeded outward FDI.  Outward FDI increased considerably, from 
Sw F 20.8 billion in 2003 to Sw F 94.3 billio n in 2006 (exceeding the previous peak of 
Sw F 75 billion in 2000) before decreasing to Sw F 56 .7 billion in 2007.  Reinvested earnings counted 
on average for slightly above 50% of the total am ount of outward FDI, followed by acquisitions.  
Nevertheless, the latter have increased rapidly, r eaching some Sw F 55 billion in 2006, due to the 
strong growth in the international economy and th e high level of liquid funds held by companies.21  
Strong capital outflows during 2003-07 resulted in an increase by some 60% in the stock of outward 
FDI, which reached Sw F 679.4 billion in 2007 (equiva lent to 130.4% of GDP).  In 2006, the services 
sector accounted for 60% of the capital stock abroad , down from 66% in 2003.  This relative decrease 
is due to the steady increase of acquisitions in the manufacturing sector.   
                                                      
20 SNB (2007a). 
21 SNB (2007a). WT/TPR/S/208/Rev.1 Trade Policy Review 
Page 16 
 
 
43. The EC(27) is the major destination for outward  FDI from Switzerland;  its share in the total 
increased from some 46% in 2004 to 50% in 2007.  The United States continues to be (on average) 
the largest single destination.  Outward FDI by Sw iss companies in the United States consists mostly 
of acquisitions or increases in the capital of existin g firms, as well as reinvested earnings.  Swiss 
companies have invested abroad in, inter alia , financial services, chemicals and plastics, and other 
manufacturing industries and construction.  Outw ard investment in chemicals and plastics has 
recorded the biggest increase, with  the value of stock almost doub ling between 2003 and 2006.  Swiss 
investments in the offshore financial centres of Central and South America surged in 2006, resulting 
in a capital stock of Sw F 93.3 billion.  These offs hore financial centres (the most important being 
Bermuda and the Cayman Islands) mainly serve as a hub for investments in third countries.22  
44. Since 2006, Swiss FDI data also include Liechtenstein;  no separate data are available.   
(4) OUTLOOK  
45. Switzerland's nominal GDP is expected to in crease by 3.1% on average during the 2009-11 
finance plan.  However, in 2008, economic activity in Switzerland is expected to slow due to poor 
performance of the global economy.  On the other ha nd, consumer spending is expected to rise as a 
result of a reduction in unemployment and an incr ease in base salaries.  The SNB forecasts real GDP 
growth of between 1.5% and 2% for 200823, with further deceleration expected in 2009.  Average real 
GDP growth for 2009-11 is forecast at 1.5%.   
46. The slowdown of economic growth is most likely to result from the decrease of import 
demand in the EC and United States;  this would cause a decline in mercha ndise export growth and a 
reduction in financial services income.  Continued ap preciation of the Swiss franc may also have an 
impact on exports.  The decrease in earnings of th e banking sub-sector will also affect GDP growth, 
given the importance of financial services in the Swiss economy.  In addition, decelerating exports, 
together with global financial tension and inflationary pressure from the world oil price, may 
undermine consumer confidence, decreasing consumption expenditures.24 
47. Inflation is forecast to reach 2.7% in 2008, due to the increase in energy prices.  A further rise 
in energy prices could result in yet higher inflati on.  Nonetheless, assuming that Libor remains around 
2.75%, the SNB expects inflation to ease toward the end of 2008.  Average annual inflation is 
expected to be 1.7% in 2009 and 1.3% in 2010.  The improvement in the inflation outlook for 2009 and 2010 is attributable to the expected slowdown of  the economy.  Nevertheless, there is still a risk 
that the expectation of rising prices could trigger an increase in wages and core inflation.
25  I n  
addition, oil prices may continue to increase. 
48. In Liechtenstein, based on assessments of the global economy, economic growth is expected 
to slow down temporarily from 2008.  The unemploymen t rate is expected to decrease slightly in 2008 
to an average rate of 2.5%.  The international financial crisis and the economic slowdown on export 
markets worsen the economic outlook.  Due to th e customs and monetary unions, the expected 
developments in inflation are the same as in Switzerland. 
                                                      
22 SNB (2007a). 
23 SNB Press Release, "Monetary policy asse ssment of 13 March 2008".  Viewed at:  
http://www.snb.ch/en/mmr/reference/pr e_20080313/source/pre_20080313.en.pdf. 
24 IMF (2008b). 
25 Core inflation excludes prices of food, beverages, tobacco, season al products, energy, and fuels.