Liechtenstein remains on recovery course

Liechtenstein’s economic prospects remain positive on an international comparison. Goods exports have been increasing again since mid-2020. The inflation trend will determine the development of the financial market. These are the findings of the Financial Market Authority in its most recent Economics Monitor.

The economy and trade in Liechtenstein have recovered significantly since mid-2020 partly as a result of fiscal policy interventions, the Financial Market Authority of Liechtenstein (FMA) writes in its Economics Monitor for Q1 2021, but it goes on to say that a weakening of dynamics was observed in Q4 2020. However, in Q1 of this year, goods exports from Liechtenstein were above the previous year’s level for the first time since the start of the pandemic. The FMA determines that further development of the real economy depends on the development of demand in the country’s most important export markets above all.

The Economics Monitor further states that the effects of the pandemic have thus far been limited in the finance sector. The FMA attributes this to the high capital resources and liquidity of the domestic banking sector, among other things. Moreover, the proportion of non-performing loans only rose to a low level in the second half of 2020. However, the effects of the measures to protect the real economy from the consequences of the pandemic on financial stability must “continue to be watched very closely” according to the FMA.

Analysts at the FMA used the development of inflation as the key indicator for the development of the financial markets. They assume that there will be mounting inflation pressure in the months to come. Additionally, it still remains to be seen whether the government support measures have largely prevented corporate insolvencies or only delayed them.

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