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Economic Overview

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Luxembourg’s economy is characterized by its financial system and a high degree of international openness. The financial sector is the main driving force behind the Grand Duchy’s economy, representing about one-third of the country’s GDP, making Luxembourg vulnerable to external shocks. After contracting following the outbreak of the COVID-19 pandemic, Luxembourg’s GDP rebounded in 2021 and grew an estimated 1.6% in 2022 on the back of resilient private consumption and a robust financial sector. The IMF forecasts growth to decelerate to 1.1% in 2023 as private consumption is expected to rise, supported by government measures to mitigate the impact of high energy prices and by the indexations of wages. Investment, which will be subdued this year amid the tightening of financial conditions, should support growth in 2024 when GDP is forecast to rise by 2.5% (IMF).

Luxembourg is the wealthiest country in the world in terms of GDP per capita (PPP) and has one of the highest current account surpluses as a share of GDP in the eurozone. It generally maintains a healthy budgetary position; however, the budget deficit turned negative in 2022 (-0.7% of GDP) due to the government measures taken to offset high energy prices and inflation. Some of these support packages were extended in the 2023 budget, including the reduction in the prices of fuels and heating oil, energy subsidies for low-income households and support schemes for companies affected by high energy costs, as well as a 1% temporary reduction in VAT, resulting in a forecast fiscal deficit of 2.4% of GDP in 2023 (Fitch Ratings). The public debt level is among the lowest in the region, though it increased to 25.4% in 2022 according to the IMF, with an upward trend projected over the forecast horizon (25.8% this year and 26% in 2024). After peaking in the second quarter of the year, headline inflation gradually decelerated in the last two quarters, driven by the slowdown in energy and services price growth, while prices of food and non-energy industrial goods continued to accelerate. For the year as a whole, inflation reached 8.4%, with major contributions from energy and food prices. The IMF expects inflationary pressures to ease in 2023 (3.7%) and in 2024 (2.3%, close to the ECB’s target). In recent years, the country has implemented a policy of legal reforms to respond a criticism regarding the lack of transparency of its financial centre and its fiscal dumping policy towards multinationals. Luxembourg is cooperating with other countries to fight against fraud and fiscal evasion. Introducing an automated exchange of fiscal information among states has put its banking secrecy de facto to an end. The country was taken off the list of uncooperative tax havens, established by the Global Forum on Transparency and Exchange of Information for Tax Purposes.

After rising following the outbreak of the pandemic, unemployment decreased to 5% in 2022 and is expected to remain stable over the forecast horizon. The working opportunities attract a large number of border workers: almost 200,000 workers cross every day the French, Belgian and German borders. Despite being the countries with the highest income per capita (USD 141,587 at PPP in 2022), around 116,000 residents live below the poverty line, according to the latest data available from Statec (in Luxembourg, the poverty line is calculated at 60% of the median standard of living, i.e. EUR 2,177 per month per adult).

Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 81.7189.1094.0399.09103.77
GDP (Constant Prices, Annual % Change) 1.4-
GDP per Capita (USD) 126,598135,605140,308144,960148,829
General Government Balance (in % of GDP) 1.0-0.2-1.1-1.1-0.8
General Government Gross Debt (in % of GDP) 24.827.629.330.230.4
Inflation Rate (%) n/a3.
Unemployment Rate (% of the Labour Force)
Current Account (billions USD) 2.963.283.794.104.36
Current Account (in % of GDP)

Source: IMF – World Economic Outlook Database , October 2021

Country Risk

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Main Sectors of Industry

The government has been aiming at economic diversification for a few years and has been encouraging the development of sectors such as communication and information technologies, logistics, e-commerce and biotechnologies. The number of foreign citizens in the labour market outweighs the number of Luxembourgish nationals.

The agricultural sector is almost non-existent, as the country’s arable land is limited to 131.6 thousand hectares (FAO). It contributes only 0.2% to the GDP and employs less than 1% of the active population (World Bank, latest data available). The country's main crops are wine, wood, cereals and potatoes. According to data from Eurostat, Luxembourg’s overall agricultural output (EUR 595 million) accounted for only 0.1% of total EU output in 2022.

The industrial sector (11.2% of the GDP and 11% of the active population), has historically been dominated by the production of iron and steel. Numerous industrial sites of the mining district in Southern Luxembourg gave its development and its wealth to the country. In recent years, this sector has been diversified with the addition of chemical factories, plastic products and light engineering. Nowadays, the manufacturing sector represents only 5% of GDP (World Bank). Data from Statistics Luxembourg shows that in the first eleven months of 2022, the value of industrial production increased by 19% over the same period one year earlier.

With the oil shock of 1973 and the crisis which followed, the Luxembourg economy turned to the development of a services economy like most developed countries. The tertiary sector (employing 89% of the active population) represents nearly 79.3% of the national wealth, with more than half of it attributed exclusively to financial and real estate services. Luxembourg is one of the world's largest money markets and investment fund managers in the world. The financial sector is the economic engine of the country, representing more than one-fourth of GDP and a significant portion of the country’s tax revenues (recording a 5.1% CAGR between 2011-2021), directly occupying 64,500 persons (data Deloitte Luxembourg). It is the main centre of private banks in the Eurozone and home to many reinsurance companies. The Grand Duchy has sought to diversify its economy, currently over-dependent on the financial sector: it is trying to develop its assets to position itself as a centre for media and new information and communication technologies and to attract companies providing electronic services, including e-commerce. Nowadays, trade, transport, hotels and gastronomy sectors combined are the main employers (almost double the employees of the finance and insurance sectors).

Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 1.1 9.4 89.5
Value Added (in % of GDP) 0.2 12.3 78.4
Value Added (Annual % Change) 3.4 1.4 1.9

Source: World Bank - Latest available data.

Monetary Indicators 20152016201720192020
Euro (EUR) - Average Annual Exchange Rate For 1 USD 0.940.940.890.890.88

Source: World Bank - Latest available data.



Foreign Trade

Due to its small size and its location, Luxembourg is very open to foreign trade, which represents 388% of its GDP (the highest level in the world - World Bank). The country mainly exports commercial services, especially those related to finance. Concerning merchandise, the main exports by product category are manufactured goods in metals (23.4%), machinery (18.2%), other manufactured goods classified according to raw materials (15.5%), and transport equipment (10%); whereas imports are led by machinery (16.5%), transport equipment (15.9%), chemicals and related products (12.8%), and mineral fuels (9.3% - data Statistics Luxembourg).

Luxembourg is very dependent on its EU partners: in 2021, almost 92.5% of total imports of goods come from other member states (against 88% of total exports), and trade activities with its three neighbouring countries represent more than 50%. Its main customers are Germany (26.1%), France (16.1%) and Belgium (12.8%); the main suppliers being Belgium, Germany and France, which account for 33.2%, 27% and 13.1% of total imports, respectively (data Statistics Luxembourg). Luxembourg is trying to diversify its exports outside the European Union, and the country currently has significant trade relations with Asian and Middle Eastern nations.

In 2021, the country exported USD 140 billion of services (+27% y-o-y), importing USD 110.5 billion (+27.9% - data by WTO). Although the merchandise trade balance is negative (with imports totalling USD 16.6 billion against USD 25.8 billion of exports), Luxembourg has an overall positive trade balance, estimated at 34.7% of its GDP by the World Bank (the third-highest ratio in the world in 2021). According to preliminary data from the Banque centrale du Luxembourg, in the first half of 2022, the current account recorded a surplus of EUR 2.27 billion: both exports and imports of goods showed significant increases of around 19% each. The balance of international trade in services increased by 9.1% in the same period (+ EUR 1 billion), as exports increased more than imports (+6.1% and +5.3%, respectively).

Foreign Trade Values 20182019202020212022
Imports of Goods (million USD) 24,17524,26421,16526,17026,528
Exports of Goods (million USD) 16,41216,45113,83916,80017,274
Imports of Services (million USD) 87,08291,54798,131119,977111,326
Exports of Services (million USD) 109,461112,683120,848148,565134,561

Source: World Trade Organisation (WTO) ; Latest available data

Foreign Trade Indicators 20182019202020212022
Foreign Trade (in % of GDP) 362.4377.8365.2388.1384.5
Trade Balance (million USD) 2,0391,6181,3331,105114
Trade Balance (Including Service) (million USD) 24,40022,75624,25929,67826,334
Imports of Goods and Services (Annual % Change) 3.75.7-0.411.8-0.9
Exports of Goods and Services (Annual % Change)
Imports of Goods and Services (in % of GDP) 164.9173.5165.6176.7175.1
Exports of Goods and Services (in % of GDP) 197.5204.3199.6211.4209.4

Source: World Bank ; Latest available data

Foreign Trade Forecasts 2023 (e)2024 (e)2025 (e)2026 (e)2027 (e)
Volume of exports of goods and services (Annual % change) -
Volume of imports of goods and services (Annual % change) -

Source: IMF, World Economic Outlook ; Latest available data

Note: (e) Estimated Data

International Economic Cooperation
Member of the European Union, WTO, OCDE

Main Partner Countries

Main Customers
(% of Exports)
Germany 25.5%
France 15.3%
Belgium 12.4%
Netherlands 6.9%
Italy 4.3%
See More Countries 35.7%
Main Suppliers
(% of Imports)
Belgium 24.3%
Germany 22.1%
France 10.7%
Netherlands 4.8%
Italy 3.1%
See More Countries 34.9%

Source: Comtrade, Latest Available Data



Political Outline

Current Political Leaders
Grand Duke: HENRI (since 7 October 2000) - hereditary
Prime Minister: Xavier BETTEL (since 4 December 2013)
Next Election Dates
Chamber of Deputies: 31 October 2023
Main Political Parties
Luxembourg has a multi-party system. No party has a chance of gaining power alone, and parties work with each other to form coalition governments. The major political parties in the country are:

- Democrat Party (PD/DP): centre, centre-right, follows the liberal political ideology
- Christian Social Party (PCS/CSV): centre-right, a Christian democratic conservative party with pro-Euro ideology, maintains one-third of parliamentary seats, dominant party for nearly a century
- Alternative Democratic Reform Party (ADR): centre-right, a conservative nationalist party with anti-Euro ideology
- The Left (DÉI LÉNK): centre-left
- Socialist Workers' Party (POSL/LSAP): centre-left, progressive
- Pirate Party: direct democracy, pro-European
Executive Power
The chief of the state is the Grand Duke. The monarch is hereditary. Following popular parliamentary elections, the leader of the majority party or the leader of the majority coalition is appointed as Prime Minister by the monarch to serve a five-year term. Prime Minister is the head of the government and enjoys executive powers which include implementing the law and running the day-to-day affairs of the country. The Council of Ministers (cabinet) is recommended by the Prime Minister and appointed by the monarch.
Legislative Power
The legislative power is based on the joint action of the Chamber of Deputies, the Government and the Council of State. The Chamber of Deputies, composed of 60 deputies elected for five years by universal suffrage, has the main function of voting bills. Its members also have a right of "parliamentary initiative" which is exercised by the presentation of bills, but which remains moderately used.
The Council of State is an advisory body composed of 21 members appointed by the Grand Duke on the advice of the Prime Minister.


COVID-19 Country Response

Travel restrictions
Regularly updated travel information for all countries with regards to Covid-19 related entry regulations, flight bans, test and vaccines requirements is available on TravelDoc Infopage.
To find information about the current travel regulations, including health requirements, it is also advised to consult Travel Regulations Map provided and updated on a daily basis by IATA.
Import & export restrictions
A general overview of trade restrictions which were adopted by different countries during the COVID-19 pandemic is available on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.
Economic recovery plan
The summary of the EU’s economic response to the COVID-19 pandemic is available on the website of the European Council.
For the general overview of the key economic policy responses to the COVID-19 outbreak (fiscal, monetary and macroeconomic) in Luxembourg, please consult the country's dedicated section in the IMF’s Policy Tracker platform.
Support plan for businesses
For an evaluation of impact of the Covid pandemic on SMEs and an inventory of country responses to foster SME resilience, refer to the OECD's SME Covid-19 Policy Responses document.
You can also consult the World Bank's Map of SME-Support Measures in Response to COVID-19.