Liechtenstein: The Fiscal Sector Framework

This paper analyzes Liechtenstein's fiscal framework, highlighting its successful consolidation following the global financial crisis. The study examines the budget balance rule that anchors fiscal policy, benchmarking key fiscal indicators against European peers. Findings reveal Liechtenstein effectively implemented frontloaded fiscal consolidation through revenue and expenditure measures, improving the fiscal balance by 4.1 percent of GDP during 2014-18. Despite maintaining low tax rates, Liechtenstein operates with a lean government structure, evidenced by low public employment levels and wage bills. The analysis concludes that increased capital investment could boost productivity, which has stagnated over the past two decades despite being higher than Switzerland's.