Front Matter
Author:
International Monetary Fund. European Dept.
Search for other papers by International Monetary Fund. European Dept. in
Current site
Google Scholar
Close

IMF Country Report No. 25/76

Copyright Page

IMF Country Report No. 25/76

PRINCIPALITY OF LIECHTENSTEIN

2025 ARTICLE IV CONSULTATION—PRESS RELEASE; STAFF REPORT; AND STATEMENT BY THE EXECUTIVE DIRECTOR FOR PRINCIPALITY OF LIECHTENSTEIN

March 2025

Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of the 2025 Article IV consultation with Principality of Liechtenstein, the following documents have been released and are included in this package:

  • A Press Release summarizing the views of the Executive Board as expressed during its March 21, 2025 consideration of the staff report that concluded the Article IV consultation with Principality of Liechtenstein.

  • The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on March 21, 2025, following discussions that ended on January 20, 2025 with the officials of Principality of Liechtenstein on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on March 3, 2025.

  • An Informational Annex prepared by the IMF staff.

  • A Statement by the Executive Director for Principality of Liechtenstein.

The documents listed below have been or will be separately released.

Selected Issues

The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.

Copies of this report are available to the public from

International Monetary Fund • Publication Services

PO Box 92780 • Washington, D.C. 20090

Telephone: (202) 623-7430 • Fax: (202) 623-7201

E-mail: publications@imf.org Web: http://www.imf.org

International Monetary Fund

Washington, D.C.

© 2025 International Monetary Fund

Press Release

PR25/078

IMF Executive Board Concludes 2025 Article IV Consultation with the Principality of Liechtenstein

FOR IMMEDIATE RELEASE

Washington, DC – March 27, 2025: The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation1 with Liechtenstein on March 21, 2025.

After exhibiting significant volatility in 2020-23 with the pandemic and spillovers from Russia’s war in Ukraine, growth has resumed, albeit at a low rate. After negative growth in 2022 and 2023, output is estimated to have increased by 0.5 percent in 2024. After peaking in August 2023, inflation has come down and recently receded to below 1 percent. The labor market remains tight with the unemployment rate well below the EU average. The Liechtenstein’s fiscal framework has continued to deliver sizable surpluses, contributing to large and growing buffers. The financial sector contributes about 20 percent of GDP and banks are liquid and well-capitalized.

The economy is recovering moderately. GDP growth is expected to gain momentum in 2025. A recovery in external demand for industrial products and services and a steady increase in financial services are expected to support growth reaching 1 percent in 2025. Inflation is expected to remain below 1 percent, with risk of settling at very low levels in the medium term. The labor market is expected to remain tight and support private consumption and growth, with unemployment declining slightly in 2025. Over the medium-term, the economy is projected to achieve a potential growth rate of 2 percent—somewhat below the pre-pandemic average growth of 2.5 percent.

Risks to the outlook are tilted to the downside. As a highly open economy, a potential regional or global slowdown or accelerated geoeconomic fragmentation would adversely affect exports and impede recovery. This could be compounded by safe-haven flows to Switzerland. As Liechtenstein uses the Swiss franc, appreciation of the franc could affect Liechtenstein’s exports. While households have high savings, elevated indebtedness poses risks in the event of a large shock. On the other hand, large fiscal buffers provide room to respond.

Executive Board Assessment2

Executive Directors agreed with the thrust of the staff appraisal. They welcomed the first Article IV Consultation with Liechtenstein and commended the authorities’ prudent economic policies that have delivered strong fundamentals, including large fiscal buffers and virtually no public debt. Directors noted, however, that risks to the outlook—stemming from a potential global slowdown, geoeconomic fragmentation, and global policy uncertainties—are tilted to the downside. Against this backdrop, Directors encouraged policies to enhance Liechtenstein’s economic resilience further while addressing long-term challenges related to aging, climate, and growth-enhancing investment needs.

Directors welcomed the strong fiscal position and the fiscal framework that has allowed some flexibility in responding to shocks, including using automatic stabilizers. In view of the budget rule’s tightening bias, which has delivered continued large surpluses during periods of economic downturn, expanding the focus of fiscal policy—beyond further accumulation of buffers—to ensure timely responses to shocks while addressing longer-term spending needs could be considered. Directors concurred that identifying, costing, and prioritizing large investment projects would strengthen medium-term budgeting and looked forward to progress in this regard.

Directors emphasized that continued close supervision of Liechtenstein’s large and complex financial sector is needed to ensure financial stability and contain risks. They welcomed that the banking sector remains liquid and well-capitalized, with strong asset quality. Noting high household indebtedness, Directors encouraged the authorities to continue calibrating macroprudential policies in line with financial stability risks. Given the financial center model with a large international client base, they urged continued vigilance and sustained compliance with AML/CFT international standards. Further mitigating prudential risks in the fiduciary sector would also be important.

Directors stressed the importance of structural policies to address labor market imbalances, as well as cybersecurity and climate risks. They supported the authorities’ focus on addressing skills shortages, increasing the labor supply, and sustaining productivity growth, including measures to boost labor participation by women and older workers. Addressing future pension system financing needs is critical to preserve sustainability. Directors encouraged the authorities to mitigate cybersecurity risks further and to advance their climate agenda.

Directors stressed that timely data are key to greater transparency and enhanced policymaking. They encouraged the authorities to close gaps in macroeconomic statistics, including by leveraging IMF technical assistance.

Table 1.

Liechtenstein: Selected Economic Indicators, 2022–2030 1/

(Percent of GDP, unless otherwise indicated)

article image
Sources: Liechtenstein authorities and IMF staff calculations. 1/ Liechtenstein does not compile price statistics. The authorities estimate real GDP by deflating nominal GDP using the Swiss GDP deflator. This approach is followed here. 2022 and 2023 are estimates. 2024 and onwards are projections. 2/ Swiss CPI is used as a proxy to measure Liechtenstein's inflation. 3/ Unemployment data refers to the Liechtenstein residents only. The employment data includes daily cross-border commuters who work in Liechtenstein. The wage data is updated every two years and estimated for the period in between. The Liechtenstein Office of Statistics produces the registered unemployment rate.

Title page

PRINCIPALITY OF LIECHTENSTEIN

STAFF REPORT FOR THE 2025 ARTICLE IV CONSULTATION

March 3, 2025

KEY ISSUES

Context. Liechtenstein’s fiscal framework has ensured surpluses, virtually no public debt, and accumulation of large fiscal buffers. Specialized, export-oriented industries and financial services based on private banking and wealth management underpin economic activity and high living standards, supported by a currency treaty and customs unions with Switzerland, membership in the European Economic Area, and sizable cross-border commuting. The authorities have pledged to address data gaps.

Outlook and risks. The economy is estimated to have grown at 0.5 percent in 2024 and is projected to pick up moderately in 2025. Inflation is expected to remain low, falling below one percent in the medium term. The labor market will remain tight. Fiscal surpluses will continue, along with accumulation of buffers. Risks are tilted to the downside, including a global slowdown, which would pose challenges for the export-oriented economy. As a financial center, Liechtenstein is susceptible to a range of risks due to dependency on foreign client base.

Key Policy Recommendations

  • Fiscal policy. With large buffers and no independent monetary policy, fiscal policy should focus additionally on responding to shocks and addressing long-term spending needs from aging, climate, and public investments.

  • Financial sector. Macroprudential policies should continue to be calibrated to address financial stability risks. The financial center model warrants continued focus on compliance and a strong AML/CFT framework.

  • Structural policies. Measures are needed to narrow skills gaps for residents and increase domestic labor supply (women, older workers). Preserving pension system sustainability is essential in the face of adverse demographic trends.

  • Closing data gaps. Priorities include improving timeliness of national accounts and establishing balance of payment statistics.

Approved By:

Mark Horton (EUR) and Martin Cihak (SPR)

The mission took place in Vaduz during January 7–20, 2025. The staff team comprised Kazuko Shirono (Head), Rodgers Chawani, Thomas Elkjaer, Tara Iyer (all EUR), and Andrew Baer (STA). Patryk Loszewski (Executive Director) and Philippe Alexander Zellweger (OED) participated. Marizielle Evio and Zhengting Yue assisted from IMF HQ. The mission met with the Hereditary Prince, the Prime Minister and Minister of Finance, the Deputy Prime Minister and Minister of Home Affairs, Economy, and Environment, representatives of the Ministry of Social Affairs and Culture, the Ministry of Foreign Affairs, Education, and Sport, and the Ministry of Infrastructure and Justice; the Financial Market Authority; the Office of Statistics; banks and other government and private sector representatives; the Liechtenstein Institute, and representatives of academia.

Contents

  • CONTEXT AND RECENT DEVELOPMENTS

  • OUTLOOK AND RISKS

  • POLICY DISCUSSIONS

  • A. Fiscal Policy

  • B. Financial Sector Policies

  • C. Structural Policies

  • D. Data and Statistics

  • STAFF APPRAISAL

  • FIGURES

  • 1. Real Sector Activity

  • 2. Labor Market Developments

  • 3. Fiscal Sector Developments

  • 4. Financial Sector Developments

  • TABLES

  • 1. Selected Economic Indicators, 2022–2030

  • 2a. Summary of General Government Operations, 2022–2030

  • 2b. Summary of General Government Operations, 2022–2030

  • 3. Balance of Payments, 2021–2030

  • 4. Banking Developments, 2017–23

  • 5. Financial Soundness Indicators, 2018–24

  • ANNEXES

  • I. Structural Characteristics of the Liechtenstein Economy

  • II. Foreign Economic Relations

  • III. Risk Assessment Matrix

  • IV. External Sector Assessment

  • V. CD Strategy to Develop Macroeconomic Statistics

  • VI. Data Issues

1

Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

2

At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm.

Citation Info

  • Collapse
  • Expand
Principality of Liechtenstein: 2025 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Principality of Liechtenstein
Author:
International Monetary Fund. European Dept.