Luxembourg: Economy records sharpest contraction in seven-and-a-half years in Q1
June 29, 2020
GDP declined 0.2% year-on-year in the first quarter, contrasting the 3.0% expansion tallied in the fourth quarter of last year. Q1's reading marked the worst reading since Q3 2012.
The downturn reflected the impact of the coronavirus and associated containment measures on domestic activity. Private consumption contracted 3.2% year-on-year in Q1, contrasting the 1.9% expansion in Q4. Moreover, fixed investment plunged 13.2%, down markedly from the previous quarter’s 7.5% increase, while public spending growth decelerated to 3.9% after expanding 5.3% in Q4.
On the external front, exports of goods and services contracted 0.4% in Q1, marking the worst reading since Q1 2019 (Q4 2019: +0.9% yoy) amid global lockdowns and severed supply chains. In addition, imports of goods and services contracted 2.0% in Q1 (Q4 2019: +1.1% yoy).
On a seasonally-adjusted quarter-on-quarter basis, GDP declined 2.9% in Q1, contrasting the previous quarter's 0.4% growth. Q1's reading marked the sharpest downturn since Q4 2008.
Looking ahead, the economy is expected to contract this year as confinement measures constrain household and capital spending, while feeble global demand will depress the external sector. Fiscal and monetary stimulus measures should offer some support, however.
Author: Hanna Andersson, Economist