Luxembourg Economic Forecast

Luxembourg Economic Outlook

October 27, 2020

Incoming data suggests the economy gradually recovered in the third quarter, after GDP contracted for the first time in nearly eight years in the second quarter on the blow dealt by the coronavirus health crisis. New car registrations rallied in July and August, hinting at improved consumer spending in the quarter as restrictions were gradually lifted. Moreover, the unemployment rate logged the lowest reading in six months in September, indicating that the labor market continued to stabilize. Meanwhile, economic sentiment improved overall in the quarter, albeit deteriorating slightly in September amid renewed Covid-19 concerns as cases spiked again. Meanwhile, on 14 October, the government laid out its 2021 draft budget, aimed at containing the fallout from the Covid-19 crisis and supporting a healthy recovery, particularly through increased investment of 4.3% of GDP (EUR 2.7 billion).

Luxembourg Economic Growth

The economy is set to rebound in 2021, after this year’s projected contraction due to the coronavirus shock. Household spending should recover as the labor market stabilizes, while investment activity is set to bounce back. Firming global demand should support a recovery in the external sector. A protracted health crisis clouds the outlook, however. FocusEconomics analysts see GDP expanding 5.6% in 2021, which is down 0.6 percentage points from last month’s forecast, and 3.7% in 2022.

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Luxembourg Facts

Value Change Date
Exchange Rate1.120.65 %Dec 31

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