Cityscape in Luxembourg

Luxembourg Economic Forecast

Luxembourg Economic Outlook

GDP contracted by 0.1% on a seasonally adjusted quarter-on-quarter basis in Q2, contrasting the 0.6% expansion seen in the prior quarter. This decline was primarily driven by contractions in private expenditure and fixed investment. In contrast, public spending rebounded. Turning to Q3, available data is fairly downbeat. Business and consumer confidence were more pessimistic in July–August than in Q2, while the rate of unemployment increased. Furthermore, tighter financing conditions are likely exerting pressure on investment, while persistent sluggishness in Germany—Luxembourg’s largest export market—continues to weigh on the external sector. In other news, recent polls suggest that the current left-of-center coalition should retain its parliamentary majority in the general election scheduled for 8 October, hinting at policy continuity.

Luxembourg Inflation

Harmonized inflation picked up to 3.5% in August (July: 2.0%), with housing and utilities prices rising at a quicker pace. Compared to 2022, average inflation is set to fall sharply this year due to a high base of comparison and lower energy price pressures. Nonetheless, commodity price volatility remains an upside risk.

This chart displays Economic Growth (GDP, annual variation in %) for Luxembourg from 2013 to 2022.

Luxembourg Economic Data

2018 2019 2020 2021 2022
Population (million) 0.6 0.6 0.6 0.6 0.6
GDP (EUR bn) 60.1 62.4 64.8 72.4 77.5
GDP per capita (EUR) 99,869 101,586 103,484 113,954 120,200
Economic Growth (Nominal GDP, ann. var. %) 3.4 3.7 3.9 11.7 7.1
Economic Growth (GDP, ann. var. %) 1.2 2.3 -0.8 7.7 1.4
Domestic Demand (ann. var. %) 0.3 4.1 -2.9 10.5 -1.0
Private Consumption (ann. var. %) 2.6 2.3 -7.3 10.1 2.3
Government Consumption (ann. var. %) 5.4 2.6 7.8 4.7 2.6
Fixed Investment (ann. var. %) -8.0 9.0 -4.8 17.1 -9.8
Exports (G&S, ann. var. %) 3.6 4.5 0.2 12.2 -0.6
Imports (G&S, ann. var. %) 3.7 5.7 -0.4 14.3 -1.9
Industrial Production (ann. var. %) 5.8 -4.4 -12.0 27.5 17.2
Retail Sales (ann. var. %) -9.5 4.5 -1.6 8.9 1.9
Unemployment (% of active population, eop) 5.1 5.4 6.3 5.2 4.9
Unemployment (% of active population, aop) 5.5 5.4 6.4 5.7 4.8
Fiscal Balance (% of GDP) 3.0 2.2 -3.4 0.7 0.2
Public Debt (% of GDP) 20.9 22.4 24.5 24.5 24.6
Inflation (HICP, ann. var. %, eop) 1.9 1.8 -0.3 5.4 6.2
Inflation (HICP, ann. var. %, aop) 2.0 1.6 0.0 3.5 8.2
Inflation (PPI, ann. var. %, aop) 4.6 -1.9 -1.9 11.3 25.6
ECB Refinancing Rate (%, eop) 0.00 0.00 0.00 0.00 2.50
ECB Overnight Deposit Rate (%, eop) -0.40 -0.50 -0.50 -0.50 2.00
3-Month EURIBOR (%, eop) -0.31 -0.38 -0.55 -0.57 2.13
Exchange Rate (USD per EUR, eop) 1.14 1.12 1.22 1.14 1.07
Exchange Rate (USD per EUR, aop) 1.18 1.12 1.14 1.18 1.05
Current Account Balance (EUR bn) 3.9 5.5 5.5 5.7 5.9
Current Account Balance (% of GDP) 6.5 8.9 8.6 7.9 7.7
Merchandise Trade Balance (EUR bn) 1.7 1.6 1.5 0.8 0.1
Foreign Direct Investment (EUR bn) -71 146 9 21 -306

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