- GDP (PPP):
- Inflation (CPI):
- FDI Inflow:
Liechtenstein is not graded in the 2019 Index because of the unavailability of relevant comparable statistics on some facets of the economy. Despite its small size and lack of natural resources, Liechtenstein has developed into a prosperous, highly industrialized, free-enterprise economy with a vital financial services sector and the world’s third-highest per capita income. The country is closely linked to Switzerland, whose currency it shares, and the European Union. Liechtenstein is a member of the European Free Trade Association, the Schengen Area, and the European Economic Area.
Flexibility and openness to global commerce have been the cornerstones of Liechtenstein’s modern and widely diversified economy. Minimal barriers to trade and investment foster vibrant economic activity, and a straightforward, transparent, and streamlined regulatory system supports an innovative entrepreneurial sector. Banking has benefited from Liechtenstein’s high levels of political and social stability and its sound and transparent judicial system.
Prince Hans-Adam II is the head of state in this tiny principality, but his son Prince Alois wields considerable power as regent and can dismiss the government and veto bills. The center-right Progressive Citizens’ Party won a reduced share of the vote in 2017 parliamentary elections but still captured the most seats. Prime Minister Adrian Hasler, in office since 2013, remains head of the government. Traditions of strict bank secrecy have helped financial institutions to attract funds as well as interest from block chain and cryptocurrency businesses. The government has signed an agreement with the European Union to allow automatic exchanges of financial account information. In 2018, Liechtenstein and Switzerland entered into a similar agreement to exchange tax information.
Property rights and contracts are secure. Despite the appointment of judges by the hereditary monarch, the constitutionally independent judiciary is impartial. Liechtenstein is largely free of corruption, and the government enforces anticorruption laws effectively. Although the country is a leading offshore tax haven and has traditionally maintained tight bank secrecy laws, the government has made efforts to increase transparency in banking.
Liechtenstein imposes relatively low taxes. The national personal income tax rates comprise eight tax bands with a maximum rate of 8 percent. Other taxes include a state tax and a municipal tax that varies. The corporate tax rate is a flat 12.5 percent. The standard value-added tax rate is 7.7 percent. Although the fiscal system lacks transparency, government fiscal management has been relatively sound.
Establishing a business is fairly easy. Administrative procedures are straightforward, and regulations affecting business are transparent and applied consistently. Unemployment has traditionally been very low. In recent years, labor market policies have focused on reducing youth unemployment. Liechtenstein has a de facto monetary union with Switzerland but has no role in determining the Swiss National Bank’s monetary policies.
Minimal barriers to trade and investment foster vibrant economic activity. The combined value of exports and imports is equal to about 125 percent of GDP. The average applied tariff rate is 1.3 percent, and nontariff barriers are relatively minimal. Foreign and domestic investors are generally treated equally. Banking benefits from Liechtenstein’s high levels of political stability and its sound and transparent judicial system.