The latest iteration of the Big Mac Index by The Economist is here, and a familiar country finds itself in the higher echelons. In the study, the Swiss franc was rated as being one of the most overvalued currencies in the world. Switzerland also took the gold for having the most expensive Big Mac on the planet.
The Economist itself admits that its iconic Big Mac Index, first created back in 1986, is “a lighthearted guide” to how purchasing power and the value of currencies vary across the world. In short, the index uses the price of a Big Mac burger from McDonald’s to determine whether a country’s currency is overvalued or undervalued.
First, the newspaper looks at a nation’s GDP per person (not average salaries) to calculate how much a Big Mac should cost when compared to the GDP per capita of the United States - where the burger is from. This is then compared to how much the Big Mac actually costs in each nation, with the results used to see whether a currency is over or undervalued.
For example, a Big Mac costs 0,36 percent more in the United Kingdom than in the United States. However, based on the differences in GDP per capita, the Big Mac should cost 9 percent less in the UK than in the US, suggesting that the British pound is 10,3 percent overvalued.
Of course, the ranking is limited by where McDonald's has branches, meaning much of Africa, Central Asia and Russia could not be included. “Burgernomics was never intended as a precise gauge of currency misalignment, merely a tool to make exchange-rate theory more digestible,” The Economist wrote. “Yet the Big Mac Index has become a global standard, included in several economic textbooks and the subject of dozens of academic studies.”
Interestingly, Uruguay topped the GDP-adjusted Big Mac Index at the start of 2024. The Economist noted that the McDonald’s burger costs 23,7 percent more in Montevideo than it does in Arkansas, even though it should cost 17,9 percent less based on GDP. This means that the Uruguayan peso is 50,8 percent overvalued.
In second place stood the cities and cantons of Switzerland, with the Swiss franc rated as being overvalued by a whopping 45,6 percent. The Economist noted that Big Macs in the alpine nation cost 43,5 percent more than they do in the US - based on both countries' GDPs, they should cost 1,4 percent less.
The Swiss franc was one of 14 national currencies (and the Euro) to be rated as being overvalued against the dollar. What’s more, when just the cost of the burger is taken into account, the Swiss franc is by far the most overvalued currency in the world. Literally speaking, Switzerland also has the world's most expensive Big Macs at 7,1 francs.
On the flip side of the Big Mac Index stood Taiwan, Hong Kong and Indonesia. The Economist noted that Big Macs in Taiwan are 58 percent cheaper than they are in the US, despite their economies being near-equivalent. This means that the Taiwanese dollar is undervalued by around 57,6 percent.
The findings of the latest Big Mac Index have been reflected in recent years, which have seen the Swiss economy and the Swiss franc go from strength to strength. The Swiss franc’s value against the euro reached an all-time high back in September 2022, before reaching near-record highs again in October 2023 - once the effects of the bailout and subsequent merger of Credit Suisse had subsided. The franc has been more valuable than the euro since July 2022.
The Swiss franc has also been highly valued due to ongoing crises across the world. An analyst for Commerzbank wrote back in October that the currency remains a “safe haven” for entrepreneurs and banks around the world due to Switzerland’s stability. This in turn allows the franc to “punch above its weight” when compared to the likes of the euro - even if this does mean a higher relative price for a slap-up dinner at the Golden Gull.
In all, here are the countries with the most overvalued currencies in the world in 2024, according to the Big Mac Index:
For more information, check out the official website.
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