Liechtenstein: Economic Outline

Economic Indicators

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Liechtenstein, whose economy is heavily dependent on the financial and banking sectors (around one-third of GDP), has the highest GDP per capita in the world by a large margin ahead of Luxembourg and Qatar (UN Statistics). Its high exposure to international markets and small population (39.3 thousand people in 2021) are sources of volatility. As a small and open economy, Liechtenstein was particularly affected by the slump in the global economy in 2020 but recovered quickly on the back of a strong rebound in global trade. The generally high sensitivity of Liechtenstein’s economy vis-à-vis the global business cycle suggests a pronounced impact in case of a global recession.

Liechtenstein’s public finances are characterised by virtually zero debt and large financial reserves. The country has recorded budget surpluses since 2014, and even in 2020, with pandemic-related expenses, the general government level still had a surplus of CHF 445 million, which is approximately 7.5% of its GDP. The shortfall in revenue caused by the pandemic, as well as the expenses of the government's support packages, were effectively offset by a one-time profit tax revenue of about CHF 300 million. The budget balance remained significantly positive in 2021, with a surplus of CHF 224 million or about 3.5% of GDP (data Financial Market Authority – FMA). Net assets of the public sector amounted to CHF 9.4 billion at the end of the year 2020 (i.e. more than 140% of GDP), of which CHF 3.9 billion were held by social insurances (41%), CHF 3.5 billion at the state level (37%), and the remaining CHF 2.0 billion (22%) at the community level. While the public sector has virtually no debt and large financial reserves, the non-financial corporate sector is characterised by high equity and low debt levels, also due to corresponding tax incentives; so that private indebtedness is highly concentrated in the household sector (at approx. 122 % of GDP at the end of 2021 – FMA). According to the latest data from the Office of Statistics, agriculture accounts for 0.2% of GDP, industry accounts for 41.7% and services for 58.1% of GDP. Main agricultural products include wheat, barley, corn, potatoes, livestock, and dairy products. Industrial production ranges from electronics, metal manufacturing, dental products, ceramics, pharmaceuticals, and food products to precision instruments, tourism, and optical instruments. Liechtenstein's business model faced challenges as investigations after the recession of 2008 exposed the role of Liechtenstein as a tax haven. This scandal, compounded by the financial crisis that followed, led to a decrease in the value of assets managed by the country. The country has since stepped up its efforts to shed its reputation as a tax haven and has committed to complying with global standards of transparency, eliminating its banking secrecy laws and thus being removed from the OECD's grey list of Non-Cooperative Countries. Liechtenstein was officially removed from the EU's grey list in October 2018. The country has implemented a number of bilateral agreements with regard to taxation and financial crimes, including with the United Kingdom and the United States.

Despite Liechtenstein's high level of business cycle volatility, the country has managed to maintain its employment and business activity quite effectively over the past few decades. As of the end of 2021, Liechtenstein's total employment stood at 41,352 employees, which actually exceeds the number of inhabitants (39,315). More than half of these employees are commuters who mostly reside in Switzerland and Austria, as Liechtenstein was given an exception to the EU's agreement on the free movement of persons, enabling the country not to grant residence permits to its workers.

Monetary Indicators	2015	2016	2017	2018	2019
Swiss Franc (CHF) - Average Annual Exchange Rate For 1 GHS	0.26	0.25	0.23	0.22	0.19

Source: World Bank - Latest available data.

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Latest Update: November 2023