Liechtenstein: Economic Outline

Economic Indicators

Liechtenstein, whose economy is heavily dependent on the financial and banking sectors (around one-third of GDP), has one of the highest GDP per capita in the world. Its high exposure to international markets and small population (39.3 thousand people in 2022) 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. Based on preliminary figures from the Office for Statistics, the GDP at current prices remained stagnant in 2022 compared to the preceding year, showing a slight decline of -0.2%, but overall recovered from the significant decline recorded in 2020 (-5.9 %). With an average annual inflation rate of 2.8% in 2022, Liechtenstein experienced a contraction in economic output when contrasted with the high-growth performance of 2021.

Liechtenstein’s public finances are characterized 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. In the Financial Statistics 2021, published in 2023 by the Office for Statistics (AS), the public sector in Liechtenstein recorded income of CHF 1.854 billion in 2021, representing a decline of 20.4% compared to the previous year. Taxation again made the largest contribution to the public purse, accounting for 52.3% of income. During the reporting year, government spending totaled CHF 1.678 billion overall, reflecting a decrease of 10.9% year-on-year. Social security benefits and compensation for employees comprised the largest shares of public expenditure at 34.4% and 21.6% respectively. Investments accounted for CHF 82.3 million, representing 4.9% of government spending. In total, a positive budget balance of CHF 176.8 million was reported for 2021. After the exceptional year influenced by the COVID-19 pandemic in 2020, Liechtenstein returned to a degree of normality in 2021, as stated by the AS. Government spending represented 22.6% of Liechtenstein’s GDP, compared to 25.1% in the previous year. The state’s net assets amounted to approximately CHF 9.8 billion as of year-end 2021, reflecting an increase of CHF 389.9 million (4.2%) from the previous year. Just under 42% of the state’s net assets were held by social security funds, with the state level accounting for 36.6% and municipalities and citizen cooperatives for 21.4%. In recent years, the country has 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 2022, Liechtenstein's total employment stood at 42,514 employees, which actually exceeds the number of inhabitants (39,677). 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 GBP	1.47	1.33	1.27	1.32	1.25

Source: World Bank - Latest available data.

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Latest Update: May 2024