Luxembourg Economic Forecast

Luxembourg Economic Outlook

May 31, 2022

The economy likely lost steam in the opening quarter of the year amid the fallout from the war in Ukraine. Consumer sentiment soured as inflation ballooned on the back of higher energy and raw material costs. Household spending is likely to have been dented as a consequence, despite falling unemployment. Turning to Q2, consumer sentiment remained deeply pessimistic in April, while harmonized inflation rose to an all-time high. More positively, business sentiment returned to optimism in April, albeit timidly, likely supported by limited direct exposure to Russia and Ukraine. Meanwhile, the European Commission recently noted the sustainability of the public finances, the tax system, inequality in education and the green transition as key challenges going forward.

Luxembourg Economic Growth

Economic growth will slow this year due to the war in Ukraine and a less favorable base effect. Household spending will be hit by pessimistic sentiment and higher prices due to costlier energy and food. However, growth will be supported by EU funds disbursement, a tight labor market and loose monetary and fiscal policies. FocusEconomics analysts see GDP expanding 2.5% in 2022, which is down 0.1 percentage points from last month’s forecast, and 3.0% in 2023.

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Luxembourg Facts

Value Change Date
Exchange Rate1.120.65 %Dec 31

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