Under net labour income, salary payments to cross-border commuters who work in Ticino but live in Milan, for example, are included  2  The special topic in the SNB publication Swiss Balance of Payments and International Investment Position 2016 (pp. 31–38) summarises the methodology for drawing up the balance of payments and the relationships between the main aggregates. Page 3/13  under expenses. The current transfers item comprises, among other flows, expenses of the Swiss Confederation for economic development cooperation. In most countries, the trade balance dominates the current account balance and the other components often contribute very little. 3 By definition, the current account balance also corresponds to the difference between savings and domestic investment in an economy. This relationship is represented in equation 2. 4 If a country has a current account surplus, it is saving more than it is investing domestically. In this case, the surplus capital is exported abroad. By contrast, a country with a current account deficit imports capital from the rest of the world because it is investing more than it is saving. This view – the so-called financial account – is the mirror image of the current account. A country with a current account surplus – or a financial account surplus – accumulates claims (or credits) vis-à-vis counterparties abroad, so-called foreign assets. A country with a current account deficit, on the other hand, accumulates liabilities, i.e. debt visà-vis counterparties abroad, so-called foreign liabilities. The difference between foreign assets and foreign liabilities is termed the net international investment position.

Pharmaceutical companies and merchanting For some time now, the Swiss current account surplus has primarily been driven by two industries: pharmaceuticals and merchanting. 8 It is notable that net exports for these two industries have increased strongly over the last ten years despite the appreciation of the Swiss franc. This stands in contrast to many industries (e.g. machinery and tourism), which are exchange rate-sensitive and have suffered noticeably as a result of the strong franc. The decline in net exports for these industries has been largely offset by the positive developments in pharmaceuticals and merchanting. Chart 7 presents the nominal change in net exports in selected manufacturing and services industries as well as merchanting from 2007 to 2016. The net exports of goods and of services are represented by the red bars at the bottom of the chart. Net exports of goods went up by CHF 23 billion from 2007 to 2016. As already stated, this increase can mainly be attributed to pharmaceuticals and merchanting. Despite the strong appreciation of the Swiss franc, net exports in both of these industries rose sharply during this period. Why is this? In recent years, the pharmaceutical industry has profited from a growing demand for healthcare products from all over the world. The demand for these products is only slightly impacted by the price and/or exchange rate. At the same time, Switzerland has developed into a leading hub in the global commodities trade. Merchanting is also much more dependent on global economic trends than on the exchange rate.