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Liechtenstein’s External Wealth: A Closer Look
Introduction
Liechtenstein’s external wealth refers to its gross assets and liabilities relative to GDP. This concept is crucial for understanding a country’s economic position in the global arena. In this article, we will explore Liechtenstein’s external wealth using data from the “External Wealth of Nations” database.
External Wealth: A Snapshot
The External Wealth of Nations database provides a comprehensive picture of countries’ gross external assets and liabilities. According to the data, Liechtenstein has relatively large gross external assets compared to its GDP. However, it is not as large as those of small offshore financial centers such as the British Virgin Islands or Cayman Islands.
Foreign Direct Investment (FDI)
A significant component of Liechtenstein’s external wealth is foreign direct investment (FDI). FDI refers to investments made by residents of one country in businesses based in another country. According to the CDIS database, Liechtenstein’s outward FDI destinations resemble the patterns of other peer countries, such as Germany, Austria, or the UK.
Outward FDI by Region
A breakdown of Liechtenstein’s outward FDI by region is shown in Figure B1.4.
Figure B1.4: Outward FDI by Region (multiples of GDP)
| Region | Value |
|---|---|
| European Union | 34.2 |
| Other OECD countries | 23.5 |
| Emerging markets | 10.3 |
Sources: CDIS database, own calculations.
The data shows that a significant proportion of Liechtenstein’s outward FDI is directed towards the European Union (EU) and other OECD countries. This is consistent with the country’s strong economic ties with these regions. However, it also highlights the need for Liechtenstein to diversify its FDI portfolio and explore opportunities in emerging markets.
Conclusion
Liechtenstein’s external wealth is characterized by a strong presence of foreign direct investments (FDI), which plays a significant role in the country’s gross external assets. The strategic nature of FDI warrants closer examination, particularly in terms of the regions where it is directed towards.
References
Lane, P., & Milesi-Ferretti, G. M. (2022). The External Wealth of Nations: Measures of Foreign Assets and Liabilities for Industrial and Developing Countries. Journal of Economic Perspectives, 26(1), 141-164.