The International Monetary Fund’s Executive Board completed its Article IV consultation with the Principality of Liechtenstein and released the staff report, describing a challenging near-term outlook with growth expected to remain flat in 2026 and inflation staying below 1 percent, alongside downside risks linked to global uncertainty and trade barriers. Directors endorsed policy priorities centred on stronger medium-term fiscal planning, enhanced financial-sector oversight, and continued structural reforms to support medium-term growth. Economic activity was subdued in 2025, with estimated zero growth, low inflation reflecting Swiss franc appreciation, and unemployment rising to around 2 percent following workforce reductions in the automotive sector. The fiscal surplus declined but remained high at 2.8 percent of GDP, with general government net financial assets estimated above 140 percent of GDP and virtually no public debt. Most Directors recommended avoiding an overly tight fiscal stance and relying on automatic stabilizers if risks materialise, while a few emphasised the role of the balanced budget rule; Directors also urged systematic quantification of future spending pressures, including aging, climate commitments and security needs, and timely action on pension financing. In the financial sector, banks were assessed as highly capitalised and liquid with a low aggregate non-performing loan ratio, but declining capital and liquidity metrics and subdued profitability prompted calls to strengthen macroprudential oversight and stress testing, including for non-bank financial intermediaries, expand systemic risk analysis to incorporate interconnectedness across subsectors, and reinforce AML/CFT supervision, including over trustees. A supplement noted that projections were finalised before the conflict in the Middle East, with associated energy price increases expected to weigh on near-term growth and lift inflation, without changing staff’s policy advice.

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