Liechtenstein is one of the most rich countries in the world, with a GDP per capita over $170,000. Their economy used to be burden with piles of debt, but by entering custom agreements with Switzerland, Liechtenstein’s economy grew massively!
With great strategic positioning within Europe, they had minimal involvement with World War II conflict. This gave them the resources and time to become a strong and stable economy.
Liechtenstein’s success as an industrial powerhouse was due to its ability to specialize in highly specialized, high quality, and low volume manufacturing, rather than competing with low cost, high quantity manufacturing.
Watch this video to learn how Lichtenstein went from becoming a small poor nation, to one of the richest economies in the world!
Thanks for watching the video! If this video was helpful or entertaining to you, please leave a like, comment your thoughts and subscribe to the channel to see more content like this in the future!
Disclaimer
Some of the footage used in this video is not original content produced by Macro Mates. Portions of stock footage were gathered from multiple sources.
#liechtenstein #economics #macroeconomics #macromates #liechtensteineconomy
Liechtenstein is the world’s least indebted country, with the second-lowest unemployment rate, the second-highest GDP per capita worldwide, and the lowest rate of national debt. They must be born with a silver spoon in their mouth! For many years, Liechtenstein was a quite distant
Nation whose economy was based mostly on a tiny amount of textile and agricultural products. But after the Second World War, it was transformed from a nearly entirely agrarian nation into a highly advanced, export-focused industrial society with manufacturing as its main industry. 1.General economic trends: Liechtenstein was a very
Impoverished nation largely dependent on agriculture prior to World War II. However, thanks to many factors that we are going to discuss, the GDP has increased drastically. People there must be living in clovers, right?! After World War 2 and due to the high percentage
Of unemployment, many Liechtensteiners either emigrated or left the nation to take seasonal jobs elsewhere. First and foremost, Austria, Switzerland, and the United States of America were popular emigration destinations. Actually, it’s a magnet for growth in the region,
Drawing in the majority of the labor force from overseas, and it provides nearly as many jobs as its population. They have a very small population of around 40,000 inhabitants as of 2020 and much of them are of other nationalities. It has grown into a wealthy, extremely
Industrialized, free-enterprise economy with a key financial services industry and one of the highest per capita income levels in the entire globe, amid its tiny size and shortage of natural resources. There are many small and medium-sized enterprises in Liechtenstein, especially in the services industry, contributing to the country’s highly diversified economy. Many
Holding firms have set up nominal offices in Liechtenstein, contributing 30% of state revenues, thanks to the country’s low business taxes and simple incorporation procedures. It’s like everything runs like clockwork there! As of 2020, the service sector contributes to
58% of the GDP followed by the industrial sector representing around 37% of the GDP. Actually, banks and corporations there have played a major role in the services industry in helping the nation achieve a high quality of living. Liechtenstein is a manufacturing and industrial
Nation that specializes in high-tech items for the food and machine construction industries. 2.History: Established in 1719, this small Alpine nation was viewed for decades as Europe’s poor sibling since it had no natural resources and was located
In the Rhine valley, bordering Austria to the east and Switzerland to the west. Up until about 1930, agriculture remained the main source of revenue. It produced nearly entirely for its own needs, had a small internal market, and lacked the money needed to start new businesses.
It wasn’t until 1836 that Liechtenstein was swept up in the rising wave of European industrialization. After the first bank was established in 1861, infrastructure began to be developed for the very first time, with the construction of bridges over the Rhine at Schaan
And Bendern. With the construction of a road and tunnel through the Samina Valley in 1864, Alpine tourism began to gradually take off. The Austrian railway began operating trains across the nation in 1872, and Schaan-Vaduz, the capital, saw the construction of
A station. Wow, they do nothing by halves! But even this small growth proved insufficient for feeding the general population. Liechtenstein became a part of the Swiss market with the signing of the Customs Treaty in 1923 and the introduction of the Swiss currency in 1924…we’ll talk more
About this later in the video. Low wages and taxes encouraged the founding of an expanding number of firms starting in the mid-1930s. The metal, mechanical, and apparatus industries saw the establishment of the majority of these companies, many of which are still in existence today.
They’re a dab hand at reviving the economy! Currently, around 40% of the GDP is produced by industrial companies that are mostly highly technical, research-intensive, and nearly exclusively focused on exports. Among the world’s most industrialized nations is Liechtenstein. However, the majority of workers (62%) are now employed in the service sector,
With the financial services sector especially playing a significant role in the economy. 3.Close relations with Switzerland: The financial authority of Liechtenstein has bilateral connections with a variety of foreign partner authorities in addition to multilateral collaboration in European and international organizations. The Currency Treaty and the shared
Economic area have contributed to the particularly tight bilateral ties with Switzerland. The 1980 Currency Treaty with Switzerland is significant for Liechtenstein’s financial services industry for a number of reasons. First, it established the Swiss franc as the official currency of the Principality of Liechtenstein and extended confident Swiss legal and administrative
Regulations to Liechtenstein. Seems like this relationship is Lichtenstein’s golden handcuffs! Its national bank is also the Swiss National Bank (SNB). This means that, in order to be in line with monetary and currency legislation, some financial intermediaries have to submit to the SNB the necessary reporting information. But each individual supervisory
Body in Liechtenstein is still in charge of overseeing all registered financial service businesses. The Currency Treaty is a bilateral agreement governed by international law that is routinely revised and modified as needed. A double taxation agreement has been made in
Effect since 2017 and, as of the very beginning of 2018, the two states have been in compliance with the automatic exchange of information for tax purposes (AEI), which will allow information regarding financial accounts to be swapped for the inaugural time starting in the fall of 2019. It’s
Worthy to mention that of the over 37,000 working individuals in Liechtenstein, as of December 2016, about half are cross-border travelers, with roughly 55 percent residing in Switzerland. 4. It’s a great business location: Because of the nation’s strong financial regulations, a significant level of political consistency, and the stability
Of the public budget, entrepreneurs are able to concentrate on what really matters. One of the few nations in the entire globe free of debt is Liechtenstein. Stability is guaranteed by the Swiss franc’s status as the official currency, the dependability of the social and economic system,
And the certainty of the law. It’s renowned for having a robust global network and a specialized, reliable financial center. However, the nation is also extremely industrialized. The nation’s major economic sector is manufacturing and industry. Approximately 40% of workers are involved in the manufacturing and industrial sectors. In addition,
It enjoys great political stability. Its political stability index was 1.64 in 2021. For comparison, the world average in 2021 based on 193 countries is -0.07 points. Seems like the government there delivers the goods! Furthermore, both corporation law and labor law echo the nation’s liberal economic policies. The business location is appealing
Due to its low non-wage labor costs and high number of weekly working hours as compared to other European countries. The nation’s small size allows for flexibility and quick decision-making processes in all areas. Additionally, companies experience a straightforward and equitable tax system there. In fact, its corporations are subject to a unified
Corporate income tax rate of 12.5%, which is among the lowest in Europe (insert graph here). Since Liechtenstein doesn’t impose either a capital tax or a coupon tax, payment of this flat tax includes all things. Additionally, there is no tax on dividends, capital gains from assets,
Or distribution surcharges. An appealing intellectual property box allows research and development activities for the benefit of an 80% tax deduction on income. Companies are using their position to feather their own nest! 5. Economic challenges: With the banking and financial industries accounting for about one-third of GDP,
Liechtenstein’s economy is highly dependent on these industries. Its small population and strong exposure to global markets are causes of uncertainty. Due to its tiny size and open economy, it was especially hard hit by the 2020 global economic downturn and its balance of trade
Witnessed a drastic decline, although it bounced back swiftly thanks to a robust increase in international trade. Due to its economy’s general elevated susceptibility to the world’s economic cycle, a worldwide recession would likely have a significant impact. Take care Liechtenstein!
In addition, its economic strategy encountered difficulties when its status as a tax haven was revealed by inquiries conducted following the 2008 financial crisis. The value of the nation’s controlled assets dropped as a result of this scandal and the ensuing financial crisis. Since then, the nation has intensified its efforts to shed its
Image as a tax haven and made a commitment to adhering to international transparency standards. They need to get their ducks in a row! As a result, its banking secrecy rules have been repealed, and it has been taken off the OECD’s gray list of non-cooperative nations. In October
2018, it was formally taken from the EU’s “gray” list. Regarding taxation and financial crimes, the nation has put in place a number of bilateral agreements, including those with the US and the UK. Conclusion: The financial industry in Liechtenstein is facing challenges due to unstable market circumstances
In certain regions of Europe and other regions. The principality needs to modify its priorities in order to meet the evolving needs. Maintaining the long-term, steadfast stability of the banking sector is crucial to fending external shocks off. A high level of capitalization and resilience in
The financial industry is particularly crucial given the rising levels of global uncertainty, geopolitical tensions, and financial turmoil. So Lichtenstein…let’s get the show on the road!