Luxembourg: GDP drops in Q2
GDP declined 0.1% on a seasonally adjusted quarter-on-quarter basis in the second quarter, contrasting the 0.6% expansion tallied in the first quarter.
The downturn reflected contractions in private consumption, fixed investment and exports. Household spending contracted 0.4% seasonally-adjusted quarter-on-quarter in Q2, compared to a 3.5% expansion in Q1. Public consumption rebounded, growing 1.4% in Q2 (Q1: -0.1% s.a. qoq). Meanwhile, fixed investment worsened, contracting 3.2% in Q2 and contrasting the 2.2% increase logged in the prior quarter.
On the external front, exports of goods and services slid 0.6% in Q2 (Q1: 0.0% s.a. qoq). In addition, imports of goods and services deteriorated, contracting 1.8% in Q2 (Q1: +1.4% s.a. qoq).
On an annual basis, GDP declined at a quicker pace of 1.7% in Q2, compared to the previous period’s 1.6% contraction.
It is important to note that Luxembourg’s national accounting data tends to exhibit volatility and is susceptible to significant revisions due to substantial capital flow fluctuations.
On the outlook for 2023, analysts at the EIU commented:
“Growth in 2023 will be held back by tightening monetary policy, with interest rates rising sharply in the euro zone; high inflation, weighing on consumer purchasing power; and a subdued external environment, with US and global growth slowing considerably. Still-high inflation will continue to squeeze household incomes and affect private consumption. Financial services exports are the traditional driver of growth in Luxembourg, and this sector will remain dominant in 2023.”