Economy of Liechtenstein

The economy of Liechtenstein is based roughly equally on services (especially financial services) and industry, with a small but significant agricultural sector. The country participates in a customs union with Switzerland and uses the Swiss franc as its national currency. It imports more than 85% of its energy requirements. Liechtenstein has been a member of the European Free Trade Association (EFTA) since 1991 (previously its interests had been represented by Switzerland). It also has been a member of the European Economic Area (EEA) since May 1995 and participates in the Schengen Agreement for passport-free intra-European travel.

Economy of Liechtenstein
CurrencySwiss franc (CHF)
Country group
High-income economy[1]
Statistics
Population 38,748 (1 January 2020, provisional)[2]
GDP $6.215 billion (nominal, 2018)[3]
GDP growth
1.8% (real, 2011 est.)
GDP per capita
 $165,028 (2016)[4]
GDP by sector
Agriculture: 7%; industry: 41%; services: 52% (2014)
−0.4% (CPI, 2016)
Population below poverty line
N/A
N/A
0.917 very high (2018)[5] (18th)
Labour force
38,520 (2012) (2015 est.), 51% of whom commute daily from Austria, Switzerland, or Germany
Labour force by occupation
Agriculture: 0.8%; industry: 39.4%; services: 59.95% (2010)
Unemployment 1.8% (2019)[6]
Main industries
Electronics, metal manufacturing, dental products, ceramics, pharmaceuticals, financial services, food products, precision instruments, tourism, optical instruments
External
Exports $3.76 billion (2011 est.)
Export goods
Small specialty machinery, connectors for audio and video, parts for motor vehicles, dental products, hardware, prepared foodstuffs, electronic equipment, optical products
Main export partners
n/av
Imports $2.218 billion (2011 est.)
Import goods
Agricultural products, raw materials, energy products, machinery, metal goods, textiles, foodstuffs, motor vehicles
0% (2001) debt holder of Switzerland, Austria and US
Public finances
N/A
Revenues$1.29 billion (2011 est.)
Expenses$1.372 billion (2011 est.)
Standard & Poor's:[7]
AAA (Domestic)
AAA (Foreign)
AAA (T&C Assessment)
Outlook: Stable[8]
Main data source: CIA World Fact Book
All values, unless otherwise stated, are in US dollars.

History

Liechtenstein's historical customs union with Austria was dissolved in 1919. A customs treaty was signed in 1923 and since its entering into force in 1924, Liechtenstein and Switzerland have been in a customs union with each other and as such the borders between the two countries are open. The German village Büsingen am Hochrhein and the Italian village Campione d'Italia also form part of this customs union (the latter albeit in a de facto manner), which is often referred to as the Swiss customs area.

Liechtenstein utilizes the Swiss franc as its national currency. Swiss border police and customs officers secure its frontier with Austria. Currently there are 21 Swiss border guards stationed in Liechtenstein and 20 Austrian border guards securing its border (as of 2011).

Liechtenstein is a member of EFTA, and joined the European Economic Area (EEA) in 1995 in order to benefit from the EU internal market. The capitalist economy and tax system make Liechtenstein a safe, trustworthy and success-oriented place for private and business purposes, especially with its highly modern, internationally laid-out infrastructure and close connections to Switzerland.

The Principality of Liechtenstein has gone through economic and cultural development in the last 50 years like no other Western country. In the last half century, Liechtenstein has developed from a mainly agricultural state to one of the most highly industrialized countries in the world.

Foreign trade
An office of the Hilti Corporation in Hong Kong pictured in March 2010, an example of Liechtenstein's export economy.

Besides its efficient industry, there also is a strong services sector. Four out of ten employees work in the services sector, a relatively high proportion of whom are foreigners, including those who commute across the border from neighboring Switzerland, Austria and Germany. Industrial exports more than doubled in 20 years from $1.21 billion (SFr. 2.2 billion) in 1988 to $2.9 billion (SFr. 4.6 billion) in 2008. Some 15.7% of Liechtenstein goods are exported to Switzerland, 62.6% to the EU and 21.1% to the rest of the world.

The United States has been the most important export market for Liechtenstein in recent times, totaling $561 million (SFr. 876 million); Germany is second, with $479 million (SFr. 748 million) worth of imports, and Switzerland third, with $375 million (SFr. 587 million).

About 32% of the country's revenues are invested in research and development, one of the driving forces of the success of Liechtenstein's economy. Total R&D spending in 2000 rose by 20.7% to approximately $140 million (213 million francs).

Banking and finance
National Bank of Liechtenstein.

The Principality of Liechtenstein also is known as an important financial centre, primarily because it specializes in financial services for foreign entities. The country's low tax rate, loose incorporation and corporate governance rules, and traditions of strict bank secrecy have contributed significantly to the ability of financial intermediaries in Liechtenstein to attract funds from outside the country's borders. The same factors made the country attractive and vulnerable to money launderers, although late 2009 legislation has strengthened regulatory oversight of illicit funds transfers.

Liechtenstein has chartered 17 banks, three non-bank financial companies, and 71 public investment companies, as well as insurance and reinsurance companies. Its 270 licensed fiduciary companies and 81 lawyers serve as nominees for, or manage, more than 73,000 entities (primarily corporations, institutions, or trusts), partly for non-Liechtenstein residents. About one-third of these entities hold the controlling interest in other entities, chartered in countries other than Liechtenstein. The Principality's laws permit the corporations it charters to issue bearer shares. Until recently, the Principality's banking laws permitted banks to issue numbered accounts, but new regulations require strict know-your-customer practices for all new accounts.

Taxation

Liechtenstein's standard rate of VAT (Mehrwertsteuer) is identical to Switzerland's for it must mirror the latter's continually and is currently 7.7%. The reduced rate is 2.5%. A special rate of 3.7% is in use in the hotel industry.[9]

In July 2015, Liechtenstein and Switzerland signed a new agreement on double taxation, which took effect in December 2016, superseding the previous one from 1995. Some differences on the withholding tax arose, but Switzerland did not agree to introduce this practice to residents of Liechtenstein working in Switzerland.[10]

In November 2016, the parliament of the principality decided with a large majority to introduce an agreement of automatic information exchange with 27 new treaty partners, including Switzerland. Data collection will start in 2018, and effectual exchange of account information is planned for 2019.[11]

Statistics
  • GDP (PPP): $4.826 billion (2009)
  • GDP - real growth rate: 3.8% (2008)
  • GDP (PPP) - per capita: purchasing power parity - $141,100 (2008)
  • Inflation rate (consumer prices): 0.7% (2011)
  • Labor force: 35,440 of whom about 10,440 are natives 7,550 are foreigners; 17,450 commute from Austria, Switzerland, and Germany to work each day (2008)
  • Labor force - by occupation: agriculture: 8%; industry: 41%; services: 51% (31 December 2008)
  • Unemployment rate: 1.5% (December 2007)
  • Currency: Swiss franc (CHF)
  • Exchange rates: Swiss francs per US dollar - 1.3467 (2003), 1.5586 (2002), 1.6876 (2001), 1.6888 (2000), 1.5022 (1999)
  • Fiscal year: calendar year

State budget
  • revenues: $420.8 million
  • expenditures: $420.1 million, including capital expenditures of $NA (2000 est.)

Industries

The principal industries are electronics, metal manufacturing, textiles, ceramics, pharmaceuticals, food products, precision instruments, and tourism.[12]

  • Industrial production growth rate: N/A

Electricity
Main article: Energy in Liechtenstein
  • production by source
    • fossil fuel: 3,330 MWh (3.12%)
    • hydro: 76,166 MWh (94.2%)
    • nuclear: none (0%)
    • solar/wind: 1,361 MWh (2.68%)
  • Electricity - production: 80,105 MWh (2010)
  • Electricity - consumption:about 350,645 MWh (2010)
  • Electricity - exports: none
  • Electricity - imports: about 270,540 MWh (2010)

Agriculture

Exports

Imports

See also

References
  1. "World Bank Country and Lending Groups". datahelpdesk.worldbank.org. World Bank. Retrieved 29 September 2019.
  2. "Population on 1 January". ec.europa.eu/eurostat. Eurostat. Retrieved 13 July 2020.
  3. "GDP (current US$) - Liechtenstein". data.worldbank.org. World Bank. Retrieved 15 January 2020.
  4. "GDP per capita (current US$) - Liechtenstein". data.worldbank.org. World Bank. Retrieved 15 January 2020.
  5. "Human Development Index (HDI)". hdr.undp.org. HDRO (Human Development Report Office) United Nations Development Programme. Retrieved 11 December 2019.
  6. "Liechtenstein in Figures, 2019" (PDF). llv.li. Retrieved 19 August 2019.
  7. "Sovereigns rating list". Standard & Poor's. Retrieved 26 May 2011.
  8. Rogers, Simon; Sedghi, Ami (15 April 2011). "How Fitch, Moody's and S&P rate each country's credit rating". The Guardian. Retrieved 31 May 2011.
  9. https://www.vatlive.com/vat-news/liechtenstein-cuts-vat-to-7-7-2018/
  10. Liechtenstein scheitert mit Quellensteuer für Grenzgänger(in German). Neue Zürcher Zeitung (Schweiz). Retrieved 10 December 2017.
  11. Liechtenstein und Schweiz tauschen Kontoinformationen aus(in German). Blick online. Retrieved 10 December 2017.
  12. "The World Factbook — Central Intelligence Agency". www.cia.gov. Retrieved 3 August 2017.
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