Luxembourg Economic Forecast

Luxembourg Economic Outlook

May 3, 2022

After economic growth stabilized in the fourth quarter of last year, the economy likely lost some momentum in the first quarter. The war in Ukraine probably caused consumer sentiment to sour further, dropping to its lowest level since December 2008 in March. The conflict also sent consumer price inflation up as commodity prices skyrocketed, further denting household consumption in the period. On the other hand, industrial production firmed on an annual basis in January–February. Additionally, the labor market tightened and business confidence improved on average in the quarter, although the latter’s reading moderated markedly in March. Luxembourg’s economic structure, which is heavily reliant on the financial sector, should keep the impact of the war limited compared to other European nations.

Luxembourg Economic Growth

Economic growth will ease markedly this year as the base effect turns less favorable, consumer sentiment is weighed down by the Russia-Ukraine war, and higher inflation drags on consumption. The pandemic and possible further lockdowns pose downside risks. However, EU funds disbursement and loose monetary and fiscal policies should provide some stimulus. FocusEconomics analysts see GDP expanding 2.6% in 2022, which is down 0.4 percentage points from last month’s forecast, and 2.8% in 2023.

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Luxembourg Facts

Value Change Date
Exchange Rate1.120.65 %Dec 31

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