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How will the war in Ukraine impact the cost of living in Switzerland?

Aside from an acute humanitarian crisis it has created, Russian invasion of Ukraine is also impacting economies and consumer prices around the world, including in Switzerland. This is how it might touch your life in Switzerland.

How will the war in Ukraine impact the cost of living in Switzerland?

The war that started on February 24th has sent wave shocks through the global economy almost immediately.

This is how it has impacted Switzerland, and its population, so far. 

Euro – franc parity

The value of the European currency declined due primarily to the war in Ukraine, with the euro reaching parity with the Swiss franc earlier this week.

READ MORE: Parity with the euro: Why the Swiss franc is now so strong

This impacts Swiss consumers in a number of ways.

That’s because the new 1 to 1 exchange rate will have a huge effect on the export-oriented industrial sector — the backbone of Switzerland’s economy — which trades mostly with eurozone nations.

Companies could compensate for their losses by passing part of the cost increase on to consumers — that is, you. Prices of many everyday goods may go up as a result.

You can read more about the effects of the euro-franc parity here:

EXPLAINED: What does euro-franc parity mean for Switzerland?

The price of fuel

Like many European countries, Switzerland imports natural gas and oil for energy production from Russia. While these imports do not account for the major portion of Switzerland’s gasoline and oil supply, the effects are already felt at the pump.

With the current petrol price of 2 francs per litre, the cost per kilometre rose by two centimes to 71 centimes. That’s an additional 300 per year for petrol for 15,000 kilometers driven, according to motoring organisation Touring Club Suisse (TCS). 

As a comparison, when the average price of gasoline was 1.67 per litre, in 2021, an average car journey cost 69 cents per kilometre.

So depending on how much and how far you travel by car, you are likely to spend more for your journeys than before.

READ MORE: Where in Switzerland can you find the cheapest fuel?

At this point it is impossible to predict how the price of petrol will continue to develop, said Timo Ohnmacht, traffic sociologist at the Lucerne University of Applied Sciences and Arts.

“Energy costs are heavily dependent on world events. The gas price has already risen by 60 percent. If this happens with petrol, a price of 3.20 francs per litre would be conceivable”, he said.

Ohnmacht added that the price hike would not necessarily push Swiss drivers to give up their cars or take public transport instead.

“Drivers are very stable in their behaviour. In ‘what-if studies’, many often state that they would switch to public transport if petrol prices were higher, but in reality they change very little”.

READ MORE: Ukraine invasion: How reliant is Switzerland on Russia for energy?

Beyond the pump

Higher gasoline prices, however, impact not only the cost of filling up the car; they also have a so-called ‘domino effect’ on the cost of common products and household goods.

While they may not have obvious connections to oil, petroleum derivatives are used to manufacture cosmetics, medical devices, clothing made from synthetic materials, smartphones, computers and TVs —as well as everything else made from, or packaged in, plastic.

This means that a price hike will affect a very wide array of everyday goods, some essential and others less so.

READ MORE: How the cost of living will change in Switzerland in 2022

“A blow to agriculture”

Russia and Ukraine are major exporters of agricultural raw materials, including wheat necessary to make flour for bread and other baked goods, as well as corn and barley.

The prices of baked goods will not climb  significantly, however, as “the cost of flour is just over 10 percent of the price of bread in total”, according to agricultural cooperative Fenaco.

The major problem for agriculture lies in the price of fertiliser, which is essential for cultivation of healthy crops.

Fertiliser prices have increased since the Russian invasion of Ukraine.

What connection is there between fertilisers and the war?

It’s about natural gas, which Switzerland imports from Russia.

Fenaco points out that up to 80 percent of the production costs of nitrogen fertilisers are influenced by energy prices, in particular those of gas.

“To make the fertiliser, you need ammonia and nitrogen,” Philippe Rezzonico, financial analyst at Heravest investment service, said in an interview with RTS public broadcaster. “And the ammonia comes from the hydrogen that comes from natural gas”.

“We are faced with an increase in production costs, which is estimated at around 6 percent this year”, said Francis Egger, vice-director of the Swiss Farmers Union. “And that will ultimately have effects on the prices paid by consumers, for example on vegetables.”

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POLITICS

Ukraine and allies lay foundations for reconstruction at Swiss conference

Allies of Ukraine meeting in Switzerland were due Tuesday to adopt a declaration spelling out the principles and priorities of rebuilding the war-shattered country, estimated to cost at least $750 billion.

Ukraine and allies lay foundations for reconstruction at Swiss conference

Leaders from dozens of countries, international organisations and businesses have been meeting in the southern Swiss city of Lugano under tight security since Monday, discussing the best path forward for reconstruction, even as Russia’s war continues to rage in Ukraine.

‘A beautiful country’: How Ukrainian refugees see Switzerland

Speaking on the first day of the Ukraine Recovery Conference, Ukrainian President Volodymyr Zelensky and a long line of government ministers described the massive destruction caused by Russia’s February 24 invasion.

“Reconstruction of Ukraine is not a local task of a single nation,” Zelensky said via video message. “It is a common task of the whole democratic world,” he said.

Prime Minister Denys Shmyhal said the recovery “is already estimated at $750 billion”. “The key source of recovery should be the confiscated assets of Russia and Russian oligarchs,” he said.

“The Russian authorities unleashed this bloody war. They caused this massive destruction, and they should be held accountable for it”.

READ MORE: Switzerland extends sanctions against Russia over Ukraine invasion

The conference, which had been planned before the invasion, had originally been slated to discuss reforms in Ukraine before being repurposed to focus on recovery.

Shmyhal laid out the government’s phased reconstruction plan, focused first on the immediate needs of those affected by the war, followed by the financing of thousands of longer-term reconstruction projects aimed at making Ukraine European, green and digital.

Those priorities are expected to be reflected in a final Lugano Declaration setting out the general principles defining a framework for rebuilding Ukraine, which should be adopted when the conference wraps up around midday Tuesday.

As billions of dollars in aid flow into Ukraine, lingering concerns about widespread corruption in the country mean far-reaching reforms will also be seen as a condition for any recovery plan decided.

The former Soviet state has long been ranked among the world’s most corrupt countries by Transparency International.

In Europe, only Russia and Azerbaijan ranked worse.

The Ukrainians have proposed that allied countries “adopt” specific regions of Ukraine, and lead the recovery there to render it more efficient. Britain has proposed taking on the Kyiv region, while a diplomatic source said France would concentrate on the heavily-hit Chernihiv region.

Total Resistance: The Swiss Cold War manual inspiring Ukraine’s fight against Russia

In all, around 1,000 people are attending the conference, including European Commission President Ursula von der Leyen, who let out an enthusiastic “Slava Ukraini” (glory to Ukraine) after insisting on the importance of rebuilding a Ukraine better than before the war.

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