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 (38.1 thousand people in 2020) are sources of volatility. Economic activity has improved since the recession in 2009 but remains weak. Unfortunately, the COVID-19 pandemic had a severe impact on the country, as GDP contracted sharply. Although no official estimates are available (Liechtenstein’s GDP data are only available with a 13-month delay), a recovery at an annual pace of roughly 3% is expected during 2021–22.

Liechtenstein does not have a central bank, currency, or inflation measurement of its own so that such data is analyzed by the Swiss National Bank and the Swiss franc is used as the national currency. The country is a key financial hub given that its banks and insurance companies, which benefit from licences, manage CHF 120 billion in assets. In 2020l deposits were stable at CHF 44.7 billion and households accounted for more than 25% of total domestic deposits, total loans were stable around CHF 30 billion and amounted to 40% of total assets (European Banking Federation). The Principality also has a well-developed industrial sector, its industry is particularly efficient in the fields of chemistry, pharmacy, computer technology and the dental industry (top exporter of tooth crowns). Liechtenstein invests almost 5% of its income in research and development in order to continue the expansion of its advanced and competitive economy. Low business taxes (12.5% flat tax) and accessible incorporation rules allow holding companies installed in Liechtenstein to account for 30% of state revenues. Liechtenstein also imports over 90% of its energy requirements.
According to the latest data from the Office of Statistics, agriculture accounts for 0.1% of GDP, industry accounts for 42.6% and services for 57.3% 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 regards to taxation and financial crimes, including with the United Kingdom and the United States.

Liechtenstein has a very low unemployment rate. However, the majority of Liechtenstein's labour force commutes daily from Austria, Switzerland, and Germany. 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. The country’s citizens enjoy the highest GDP per capita (PPP) in the world.

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: February 2023