Luxembourg: Economy flatlines again in Q1 2026
Luxembourg’s economy stagnates for a second straight quarter: Luxembourg’s GDP stagnated on a seasonally adjusted quarter-on-quarter basis in Q1, mirroring the reading seen in Q4.
On a year-on-year basis, GDP expanded 1.7% in Q1, following a 2.0% expansion in the previous quarter.
Investment strength prevents GDP shrinkage: Relative to the prior period’s data, figures in Q1 improved for investment (+7.8% in seasonally adjusted quarter-on-quarter terms vs -9.1% in Q4), exports of goods and services (-0.8% vs -1.4% in Q4) and imports of goods and services (-0.2% vs -1.9% in Q4). In contrast, readings worsened for private consumption (-0.7% vs +0.8% in Q4) and government consumption (+0.8% vs +1.1% in Q4).
Investment emerged as the bright spot, staging a strong recovery driven by greater expenditure on non-residential construction projects and purchases of metal products and machinery.
In contrast, household consumption fell sharply, weighed on by reduced spending on healthcare, restaurant services and car-related purchases.
GDP growth to strengthen through the end of 2026: Our panelists see GDP growth returning in Q2. While the Iran energy price shock will likely weigh on private consumption, Luxembourg’s financial sector—which accounts for around a quarter of GDP—has proved relatively insulated from the U.S.-Iran war spillovers since domestic banks are little-exposed to Middle Eastern markets. Looking toward the end of the year, GDP growth should accelerate, with H2 outperforming H1 thanks to the government’s June fiscal stimulus package.