GDP contracts in the first quarter

GDP falls in Q1: Luxembourg’s economy continued to experience hiccups in Q1 2025 as GDP fell 1.0% on a seasonally adjusted quarter-on-quarter basis in the first quarter (Q4 2024: +1.3% qoq s.a.)—the worst result in the Euro area. This was the sixth change in direction over the last nine quarters. On an annual basis, economic activity declined 0.4% in Q1, contrasting the previous quarter's 1.9% growth and marking the sharpest downturn since Q4 2023.

Fall in exports and slower private consumption growth weighs on economic activity: Domestically, household spending—roughly 30% of GDP—fell 0.5% in seasonally adjusted quarter-on-quarter terms in Q1 (Q4 2024: +0.2% qoq s.a.), dragged by higher inflation. On the flip side, public spending growth accelerated to 1.2% (Q4 2024: +0.9% qoq s.a.), and total investment rebounded 4.8% (Q4 2024: -1.2% qoq s.a.), bolstered by lower interest rates. On the external front, exports of goods and services contracted 0.4% in Q1, marking the worst reading since Q1 2024 (Q4 2024: +1.7% qoq s.a.). In addition, imports of goods and services growth moderated to 0.1% in Q1 (Q4 2024: +1.7% qoq s.a.).

GDP growth to remain weak: Our Consensus is for GDP growth to pick up from 2024 in 2025: Looser financing conditions will fuel a rebound in fixed investment, buttress private consumption and bolster the crucial financial sector, which accounts for roughly a quarter of total GDP. Moreover, exports of goods and services are expected to grow at a faster pace amid stronger EU demand. That said, our panelists have slashed their 2025 GDP growth forecasts since January due to heightened uncertainty regarding global trade. As a result, Luxembourg’s economic growth is expected to remain weak by pre-pandemic standards. Escalating trade frictions and higher-than-expected inflation due to energy price spikes are downside risks.

How should you choose a forecaster if some are too optimistic while others are too pessimistic? FocusEconomics collects Luxembourg GDP projections for the next ten years from a panel of 13 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. By averaging all forecasts, upside and downside forecasting errors tend to cancel each other out, leading to the most reliable GDP forecast available for Luxembourg GDP.

Download one of our sample reports to visualize what a Consensus Forecast is and see our Luxembourg GDP projections.

Want to get access to the full dataset of Luxembourg GDP forecasts? Send an email to info@focus-economics.com.