Luxembourg Economic Outlook
Financial powerhouse:
Luxembourg is one of the world’s wealthiest countries in terms of GDP per capita, largely due to its strong financial services sector. The country serves as a key European banking and investment hub, attracting multinational corporations, private wealth, and institutional investors with its favorable regulatory environment. The banking sector alone accounts for a significant share of GDP, while the country is also a leader in investment funds—managing over €5 trillion in assets.
Diversified economy:While finance dominates, Luxembourg has a well-diversified economy, including strong industries in logistics, steel production, and satellite technology. The country has also positioned itself as a leader in fintech, artificial intelligence, and space technology. Its strategic location between Germany, France, and Belgium facilitates trade and investment, making it a critical logistics hub for Europe.
Challenges and high costs:Despite its economic success, Luxembourg faces challenges such as rising housing prices, labor shortages, and growing inequality. The high cost of living, particularly in real estate, has made it difficult for workers to afford housing, while the country remains reliant on cross-border workers from neighboring nations. Additionally, while Luxembourg’s financial sector is strong, it is susceptible to global economic fluctuations and EU regulatory changes.
Luxembourg’s economic outlook:Luxembourg’s economic growth is expected to remain strong, driven by continued expansion in financial services, innovation, and logistics. However, risks include potential EU tax policy changes that could impact its attractiveness as a financial hub and ongoing real estate affordability issues. Luxembourg’s ability to maintain its financial dominance while diversifying into new high-tech industries will be key to its future economic trajectory.
Luxembourg's Macroeconomic Analysis:
Nominal GDP of USD 85.7 billion in 2023.
Nominal GDP of USD 93.1 billion in 2024.
Nominal GDP of USD 93.1 billion in 2024.
GDP per capita of USD 138,608 compared to the global average of USD 10,589.
GDP per capita of USD 129,725 compared to the global average of USD 10,589.
GDP per capita of USD 138,197 compared to the global average of USD 10,589.
Average real GDP growth of 1.9% over the last decade.
Average real GDP growth of 2.3% over the last decade.
Average real GDP growth of 1.9% over the last decade.
Sector Analysis
In 2022, services accounted for 80.6% of overall GDP, manufacturing 3.5%, other industrial activity 15.7%, and agriculture 0.2%. Looking at GDP by expenditure, private consumption accounted for 32.2% of GDP in 2023, government consumption 19.0%, fixed investment 18.0%, and net exports 30.8%.International trade
In 2023, manufactured products made up 81.4% of total merchandise exports, mineral fuels 0.1%, food 10.9%, ores and metals 4.4% and agricultural raw materials 0.8%, with other categories accounting for 2.4% of the total. In the same period, manufactured products made up 65.4% of total merchandise imports, mineral fuels 7.2%, food 14.0%, ores and metals 5.3% and agricultural raw materials 1.7%, with other goods accounting for 6.4% of the total. Total exports were worth USD 31 billion in 2024, while total imports were USD 29.40 billion.Main Economic Indicators
Economic growthThe economy recorded average annual growth of 2.3% in the decade to 2023. To read more about GDP growth in Luxembourg, go to our dedicated page.
Fiscal policy
Luxembourg's fiscal surplus averaged 0.9% of GDP in the decade to 2023. Find out more on our dedicated page.
Unemployment
The unemployment rate averaged 5.9% in the decade to 2024. For more information on Luxembourg's unemployment click here.
Inflation
Inflation averaged 2.1% in the decade to 2024. Go to our Luxembourg inflation page for extra insight.
Monetary Policy
Euro Area monetary policy rate ended 2024 at 3.15%, up from 0.05% a decade earlier. See our Luxembourg monetary policy page for additional details.
Exchange Rate
From end-2014 to end-2024 the euro weakened by 20% vs the U.S. dollar. For more info on the euro, click here.
Economic situation in Luxembourg
The Luxembourgish economy continued its erratic pattern of contraction and expansion in Q1, shrinking by 1.0% in seasonally adjusted quarter-on-quarter terms (Q4 2024: +1.3% qoq s.a.). This marked the worst performance among all Euro area economies and the sixth change of direction in the past nine quarters. The main driver of the Q1 slowdown was a fall in exports plus a contraction in private consumption—representing roughly 30% of GDP—the latter curtailed by higher inflation. Switching to Q2, our Consensus is for the economy to have rebounded. The new salary indexation starting from May should have beefed up households' budgets, and additional ECB cuts are expected to have buttressed the all-important financial sector. Looking at available data, economic sentiment was optimistic on average in May-June, and came in at the highest level since February 2022 in May.Luxembourg Economic Forecasts
Projections out to 2034.33 indicators covered including both annual and quarterly frequencies.
Consensus Forecasts based on a panel of 14 expert analysts.
Want to get insight on the economic outlook for Luxembourg in the coming years? FocusEconomics collects projections out to 2034 on 33 economic indicators for Luxembourg from a panel of 14 analysts at the leading national, regional and global forecast institutions. These projections are then validated by our in-house team of economists and data analysts, and averaged to provide one Consensus Forecast you can rely on for each indicator. This means you avoid the risk of relying on out of date, biased or outlier forecasts. Our Consensus Forecasts can be visualized in whichever way best suits your needs, including via interactive online dashboards , direct data delivery and executive-style reports which combine analysts' projections with timely written analysis from our in-house team of economists on the latest developments in the Luxembourg economy. To download a sample report on the Luxembourg's economy, click here. To get in touch with our team for more information, fill in the form at the bottom of this page.