Luxembourg flag Luxembourg: Economic outline

Economic Outline

Economic Indicators

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 characterised by its fiscal 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 the country vulnerable to external shocks. After contracting following the outbreak of the COVID-19 pandemic, Luxembourg’s GDP returned to growth in 2021 (+5.5% according to the IMF), supported by private consumption and investment, as well as by the strong performance of the external sector. Assuming a normalization of the global sanitary and economic conjuncture, the IMF forecasts growth at 3.8% in 2022 and 3% in 2023.

Luxembourg is the second-wealthiest country in the world in terms of GDP per capita (the first in the EU - 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, nevertheless, the measures taken to address the pandemic, partially offset by an increase in revenues, caused the general government balance to slip into a deficit of -1% of GDP in 2021. In 2022, the general government balance is expected to turn to a surplus of 0.2% of GDP (EU Commission forecast), as revenues should continue to expand and crisis-related measures are phased out (although the IMF still sees a deficit of 0.2%). The public debt level is among the lowest in the region, though it increased to 26.3% in 2021 according to the IMF (from a pre-pandemic level of 22%). In 2022, the IMF forecasts a marginal increase to 26.7%, before the ratio returns to a downward trend in 2023 (26.8%). Higher global energy prices and the implementation of a carbon tax contributed to a rise in inflation, which stood at 2.7% in 2021. It is subsequently expected to moderate to 1.4% this year and 1.9% in 2023, as some energy price base effects fade out. 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 5.6% in 2021, thanks to the government’s short-term work scheme that supported employment. The IMF expects unemployment to continue its decline in 2022 and 2023, at 5.5% and 5.4%, respectively. 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 one of the countries with the highest income per capita (USD 122,740     at PPP in 2021), around 105,000 residents live below the poverty line, according to the latest data available from Statec.

 
Main Indicators 20202021 (e)2022 (e)2023 (e)2024 (e)
GDP (billions USD) 73.29e86.7782.1584.0389.14
GDP (Constant Prices, Annual % Change) -1.8e6.91.61.12.5
GDP per Capita (USD) 117e136127128134
General Government Balance (in % of GDP) -2.00.7-0.7-0.1-0.2
General Government Gross Debt (in % of GDP) 24.824.325.425.826.0
Inflation Rate (%) 0.03.58.43.72.3
Unemployment Rate (% of the Labour Force) 6.45.75.05.05.0
Current Account (billions USD) 3.024.143.503.684.00
Current Account (in % of GDP) 4.14.84.34.44.5

Source: IMF – World Economic Outlook Database, 2016

Note: (e) Estimated Data

 
Monetary Indicators 20152016201720192020
Euro (EUR) - Average Annual Exchange Rate For 1 GHS 0.250.240.200.170.16

Source: World Bank, 2015

 

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Latest Update: December 2022