Luxemburg: Visió econòmica i política
For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.
Luxembourg’s economy is characterized by its financial system and a high degree of international openness. The financial sector is the main driving force behind the Grand Duchy’s economy, representing about one-third of the country’s GDP, making Luxembourg vulnerable to external shocks. After contracting following the outbreak of the COVID-19 pandemic, Luxembourg’s GDP rebounded in 2021 and grew an estimated 1.6% in 2022 on the back of resilient private consumption and a robust financial sector. The IMF forecasts growth to decelerate to 1.1% in 2023 as private consumption is expected to rise, supported by government measures to mitigate the impact of high energy prices and by the indexations of wages. Investment, which will be subdued this year amid the tightening of financial conditions, should support growth in 2024 when GDP is forecast to rise by 2.5% (IMF).
Luxembourg is the wealthiest country in the world in terms of GDP per capita (PPP) and has one of the highest current account surpluses as a share of GDP in the eurozone. It generally maintains a healthy budgetary position; however, the budget deficit turned negative in 2022 (-0.7% of GDP) due to the government measures taken to offset high energy prices and inflation. Some of these support packages were extended in the 2023 budget, including the reduction in the prices of fuels and heating oil, energy subsidies for low-income households and support schemes for companies affected by high energy costs, as well as a 1% temporary reduction in VAT, resulting in a forecast fiscal deficit of 2.4% of GDP in 2023 (Fitch Ratings). The public debt level is among the lowest in the region, though it increased to 25.4% in 2022 according to the IMF, with an upward trend projected over the forecast horizon (25.8% this year and 26% in 2024). After peaking in the second quarter of the year, headline inflation gradually decelerated in the last two quarters, driven by the slowdown in energy and services price growth, while prices of food and non-energy industrial goods continued to accelerate. For the year as a whole, inflation reached 8.4%, with major contributions from energy and food prices. The IMF expects inflationary pressures to ease in 2023 (3.7%) and in 2024 (2.3%, close to the ECB’s target). In recent years, the country has implemented a policy of legal reforms to respond a criticism regarding the lack of transparency of its financial centre and its fiscal dumping policy towards multinationals. Luxembourg is cooperating with other countries to fight against fraud and fiscal evasion. Introducing an automated exchange of fiscal information among states has put its banking secrecy de facto to an end. The country was taken off the list of uncooperative tax havens, established by the Global Forum on Transparency and Exchange of Information for Tax Purposes.
After rising following the outbreak of the pandemic, unemployment decreased to 5% in 2022 and is expected to remain stable over the forecast horizon. The working opportunities attract a large number of border workers: almost 200,000 workers cross every day the French, Belgian and German borders. Despite being the countries with the highest income per capita (USD 141,587 at PPP in 2022), around 116,000 residents live below the poverty line, according to the latest data available from Statec (in Luxembourg, the poverty line is calculated at 60% of the median standard of living, i.e. EUR 2,177 per month per adult).
| Main Indicators | 2020 | 2021 | 2022 (E) | 2023 (E) | 2024 (E) |
| GDP (billions USD) | 73.93 | 85.56 | 82.34 | 86.97 | 90.46 |
| GDP (Constant Prices, Annual % Change) | -0.8 | 5.1 | 1.5 | 1.1 | 1.7 |
| GDP per Capita (USD) | 118,084 | 134,802 | 127,580 | 132,372 | 134,990 |
| General Government Balance (in % of GDP) | 1.1 | 1.4 | 0.8 | -0.5 | -1.2 |
| General Government Gross Debt (in % of GDP) | 24.5 | 24.5 | 24.3 | 27.4 | 29.2 |
| Inflation Rate (%) | 0.0 | 3.5 | 8.1 | 2.6 | 3.1 |
| Unemployment Rate (% of the Labour Force) | 6.4 | 5.7 | 4.8 | 5.1 | 5.4 |
| Current Account (billions USD) | 3.02 | 4.14 | 3.31 | 3.74 | 3.87 |
| Current Account (in % of GDP) | 4.1 | 4.8 | 4.0 | 4.3 | 4.3 |
Source: IMF – World Economic Outlook Database, October 2021
The government has been aiming at economic diversification for a few years and has been encouraging the development of sectors such as communication and information technologies, logistics, e-commerce and biotechnologies. The number of foreign citizens in the labour market outweighs the number of Luxembourgish nationals.
The agricultural sector is almost non-existent, as the country’s arable land is limited to 131.6 thousand hectares (FAO). It contributes only 0.2% to the GDP and employs less than 1% of the active population (World Bank, latest data available). The country's main crops are wine, wood, cereals and potatoes. According to data from Eurostat, Luxembourg’s overall agricultural output (EUR 595 million) accounted for only 0.1% of total EU output in 2022.
The industrial sector (11.2% of the GDP and 11% of the active population), has historically been dominated by the production of iron and steel. Numerous industrial sites of the mining district in Southern Luxembourg gave its development and its wealth to the country. In recent years, this sector has been diversified with the addition of chemical factories, plastic products and light engineering. Nowadays, the manufacturing sector represents only 5% of GDP (World Bank). Data from Statistics Luxembourg shows that in the first eleven months of 2022, the value of industrial production increased by 19% over the same period one year earlier.
With the oil shock of 1973 and the crisis which followed, the Luxembourg economy turned to the development of a services economy like most developed countries. The tertiary sector (employing 89% of the active population) represents nearly 79.3% of the national wealth, with more than half of it attributed exclusively to financial and real estate services. Luxembourg is one of the world's largest money markets and investment fund managers in the world. The financial sector is the economic engine of the country, representing more than one-fourth of GDP and a significant portion of the country’s tax revenues (recording a 5.1% CAGR between 2011-2021), directly occupying 64,500 persons (data Deloitte Luxembourg). It is the main centre of private banks in the Eurozone and home to many reinsurance companies. The Grand Duchy has sought to diversify its economy, currently over-dependent on the financial sector: it is trying to develop its assets to position itself as a centre for media and new information and communication technologies and to attract companies providing electronic services, including e-commerce. Nowadays, trade, transport, hotels and gastronomy sectors combined are the main employers (almost double the employees of the finance and insurance sectors).
| Breakdown of Economic Activity By Sector | Agriculture | Industry | Services |
| Employment By Sector (in % of Total Employment) | 0.7 | 10.8 | 88.5 |
| Value Added (in % of GDP) | 0.2 | 11.2 | 79.3 |
| Value Added (Annual % Change) | -0.0 | 2.9 | 5.1 |
Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.
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The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}
Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation
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Actualitzacions: September 2023
