Economy of Luxembourg

The economy of Luxembourg is largely dependent on the banking, steel, and industrial sectors. Luxembourgers enjoy the highest per capita gross domestic product in the world (CIA 2018 est.). Luxembourg is seen as a diversified industrialized nation, contrasting the oil boom in Qatar, the major monetary source of the southwest Asian state.

Economy of Luxembourg
CurrencyEuro (EUR, €)
Calendar year
Trade organisations
EU, WTO and OECD
Country group
Statistics
Population 626,108 (1 January 2020)[3]
GDP
  • $69.453 billion (nominal, 2019 est.)[4]
  • $65.868 billion (PPP, 2020 est.)[5]
GDP rank
GDP growth
  • 3.1% (2018) 2.3% (2019)
  • −4.9% (2020e) 4.8% (2021e)[5]
GDP per capita
  • $113,196 (nominal, 2019 est.)[4]
  • $108,951 (PPP, 2019 est.)[4]
GDP per capita rank
GDP by sector
  • 0.7% (2020 est.)[5]
  • 1.7% (2019)[5]
  • 2.0% (2018)[5]
Population below poverty line
 21.9% at risk of poverty or social exclusion (2018)[7]
33.2 medium (2018)[8]
Labour force
  • 300,538 (2019)[11]
  • 72.1% employment rate (Target: 73%; 2018)[12]
Labour force by occupation
Unemployment
  • 7.7% (May 2020)[13]
  • 16.4% youth unemployment (Q4-2019)[14]
Average gross salary
€5,030 / $5638 monthly (2017)
Average net salary
€3,416 / $3829 monthly (2017)
Main industries
banking and financial services, construction, real estate services, iron, metals, and steel, information technology, telecommunications, cargo transportation and logistics, chemicals, engineering, tires, glass, aluminum, tourism, biotechnology
72nd (easy, 2020)[15]
External
Exports $15.99 billion (2017 est.)[6]
Export goods
machinery and equipment, steel products, chemicals, rubber products, glass
Main export partners
Imports $20.66 billion (2017 est.)[6]
Import goods
commercial aircraft, minerals, chemicals, metals, foodstuffs, luxury consumer goods
Main import partners
FDI stock
$11.21 billion (31 December 2008 est.)[6]
Abroad: NA[6]
$3.112 billion (2017 est.)
$3.781 trillion (31 March 2016 est.)[6]
Public finances
  • 22.1% of GDP (2019)[16]
  • €14.013 billion (2019)[16]
  • €1.4 billion surplus (2019)[16]
  • +2.2% of GDP (2019)[16]
Revenues44.8% of GDP (2019)[16]
Expenses42.6% of GDP (2019)[16]
Economic aiddonor: ODA, $0.24 billion (2004)
  • Standard & Poor's:[17]
  • AAA (Domestic)
  • AAA (Foreign)
  • AAA (T&C Assessment)
  • Outlook: Stable[18]
  • Moody's:[18]
  • Aaa
  • Outlook: Stable
  • Fitch:[18]
  • AAA
  • Outlook: Positive
  • Scope:[19]
  • AAA
  • Outlook: Stable
Foreign reserves
 $878 million (31 December 2017 est.)[6]
Main data source: CIA World Fact Book
All values, unless otherwise stated, are in US dollars.
The labour productivity level of Luxembourg is one of the highest in Europe. OECD, 2012.

Although Luxembourg in tourist literature is aptly called the "Green Heart of Europe", its pastoral land coexists with a highly industrialized and export-intensive area. Luxembourg's economy is quite similar to Germany's. Luxembourg enjoys a degree of economic prosperity very rare among industrialized democracies.

In 2009, a budget deficit of 5% resulted from government measures to stimulate the economy, especially the banking sector, as a result of the world economic crisis. This was however reduced to 1.4% in 2010.[20]

For 2017 the (expected) figures are as follows: Growth 4.6%; Inflation 1.0%; Budget deficit 1.7%, to be reduced to 0.8% in 2020; Debt: 20.4%, no new debts to be taken in the fiscal year.[21]

Sectors

In 2013 the GDP was $60.54 billion of which services, including the financial sector, produced 86%. The financial sector comprised 36% of GDP, industry comprised 13.3% and agriculture only 0.3%.[22]

Banking
Luxembourg has been part of the eurozone since 1999.

Banking is the largest sector in the Luxembourg economy. In the 2019 Global Financial Centres Index, Luxembourg was ranked as having the 25th most competitive financial center in the world, and third most competitive in Europe after London and Zürich.[23] The country has specialised in the cross-border fund administration business. As Luxembourg's domestic market is relatively small, the country's financial centre is predominantly international. At the end of March 2009, there were 152 banks in Luxembourg, with over 27,000 employees. Political stability, good communications, easy access to other European centres, skilled multilingual staff, a tradition of banking secrecy and cross-border financial expertise have all contributed to the growth of the financial sector. These factors have contributed to a Corruption Perceptions Index of 8.3 and a DAW Index ranking of 10 in 2012; the latter the highest in Europe.[24] Germany accounts for the largest-single grouping of banks, with Scandinavian, Japanese, and major US banks also heavily represented. Total assets exceeded €929 billion at the end of 2008. More than 9,000 holding companies are established in Luxembourg. The European Investment Bank—the financial institution of the European Union—is also located there.

Concern about Luxembourg's banking secrecy laws, and its reputation as a tax haven, led in April 2009 to it being added to a "grey list" of nations with questionable banking arrangements by the G20,[25] a list from which it was removed in 2009.[26] This concern has led Luxembourg to modify its tax legislation to avoid conflict with the tax authorities of European Union Members. For example, the classic tax exempt 1929 Holding Company was outlawed 31 December 2010, as it was deemed an illegal state aid by the European Commission.[27]

Steel

A key event in the economic history of Luxembourg was the 1876 introduction of English metallurgy. The refining process led to the development of the steel industry in Luxembourg and founding of the Arbed company in 1911.

The restructuring of the industry and increasing government ownership in Arbed (31%) began as early as 1974. As a result of timely modernization of facilities, cutbacks in production and employment, government assumption of portions of Arbed's debt, and recent cyclical recovery of the international demand for steel, the company is again profitable. Its productivity is among the highest in the world. US markets account for about 6% of Arbed's output. The company specializes in production of large architectural steel beams and specialized value-added products. There has been, however, a relative decline in the steel sector, offset by Luxembourg's emergence as a financial center. In 2001, through the merger with Aceralia and Usinor, Arbed became Arcelor. Arcelor was taken over in 2006 by Mittal Steel to form Arcelor-Mittal, helmed by Lakshmi Mittal, the largest steel producer in the world.

Telecommunications
Main article: Telecommunications in Luxembourg

Government policies promote the development of Luxembourg as an audiovisual and communications center. Radio-Television-Luxembourg is Europe's premier private radio and television broadcaster. The government-backed Luxembourg satellite company "Société européenne des satellites" (SES) was created in 1986 to install and operate a satellite telecommunications system for transmission of television programs throughout Europe. The first SES Astra satellite, the 16-channel RCA 4000 Astra 1A, was launched by the Ariane Rocket in December 1988. SES presently constitutes the world largest satellite services company in terms of revenue.

Tourism
Main article: Tourism in Luxembourg

Tourism is an important component of the national economy, representing about 8.3% of GDP in 2009 and employing some 25,000 people or 11.7% of the working population.[28] Despite the current crisis, the Grand Duchy still welcomes over 900,000 visitors a year who spend an average of 2.5 nights in hotels, hostels or on camping sites.[29] Business travel is flourishing representing 44% of overnight stays in the country and 60% in the capital, up 11% and 25% between 2009 and 2010.[30]

Agriculture

Luxembourg's small but productive agricultural sector is highly subsidized, mainly by the EU and the government. It employs about 1–3% of the work force. Most farmers are engaged in dairy and meat production. Vineyards in the Moselle Valley annually produce about 15 million litres of dry white wine, most of which is consumed within Luxembourg and also in Germany, France, and Belgium on a lesser scale.

Data

The following table shows the main economic indicators in 1980–2017. Inflation under 2% is in green.[31]

Year GDP
(in Bil. US$ PPP)		 GDP per capita
(in US$ PPP)		 GDP growth
(real)		 Inflation rate
(in Percent)		 Unemployment
(in Percent)		 Government debt
(in % of GDP)
1980 5.7 15,611 3.2% 6.3% 0.7% n/a
1981 6.3 17,153 0.8% 8.1% 1.0% n/a
1982 6.7 18,391 1.0% 9.4% 1.3% n/a
1983 7.1 19,478 1.9% 8.7% 1.6% n/a
1984 7.7 21,106 4.7% 5.6% 1.7% n/a
1985 8.4 22,956 5.6% 14.8% 1.7% n/a
1986 9.4 25,638 10.0% 0.3% 1.5% n/a
1987 10.1 27,155 4.0% −0.1% 1.7% n/a
1988 11.3 30,223 8.5% 1.4% 1.5% n/a
1989 12.9 34,137 9.8% 3.4% 1.4% n/a
1990 14.1 36,863 5.3% 3.7% 1.3% n/a
1991 15.8 40,826 8.6% 3.1% 1.4% n/a
1992 16.5 41,943 1.8% 3.2% 1.6% n/a
1993 17.6 44,115 4.2% 3.6% 2.1% n/a
1994 18.6 46,104 3.8% 2.2% 2.7% n/a
1995 19.3 47,516 1.4% 1.9% 3.0% 8.9%
1996 19.9 48,412 1.5% 1.2% 3.2% 8.6%
1997 21.5 51,502 5.9% 1.4% 3.3% 8.5%
1998 23.1 54,757 6.5% 1.0% 3.1% 8.1%
1999 25.4 59,529 8.4% 1.0% 2.9% 7.1%
2000 28.8 65,079 8.4% 3.8% 2.2% 6.5%
2001 29.6 67,331 2.5% 2.4% 2.0% 6.9%
2002 31.2 70,249 3.8% 2.1% 2.5% 6.8%
2003 32.3 72,127 1.6% 2.5% 3.3% 6.8%
2004 34.4 75,663 3.6% 3.2% 4.0% 7.3%
2005 36.7 79,480 3.2% 3.7% 4.0% 7.4%
2006 39.7 84,722 5.2% 3.0% 4.0% 7.8%
2007 44.2 92,837 8.4% 2.7% 4.0% 7.7%
2008 44.5 91,977 −1.3% 4.1% 4.1% 14.9%
2009 42.9 86,894 −4.4% 0.0% 5.6% 15.7%
2010 45.5 90,662 4.9% 2.8% 6.0% 19.8%
2011 47.6 92,970 2.5% 3.7% 6.0% 18.7%
2012 48.3 92,102 −0.4% 2.9% 6.1% 21.7%
2013 50.9 94,824 3.7% 1.7% 6.8% 23.7%
2014 54.8 99,738 5.8% 0.7% 7.1% 22.7%
2015 57.0 101,255 2.9% 0.1% 6.8% 22.0%
2016 59.5 103,286 3.1% 0.0% 6.3% 20.8%
2017 62.8 106,373 3.5% 2.1% 5.8% 23.0%

Accounting principles

Establishing accounts depends on the size of companies, and referring to three criteria: total of the balance sheet (total of assets without losses of the accounting year), the net amount of the turnover (net, such as it appears on the profit and loss account) and the average number of the workforce.

The control of medium and big companies must be made by one or several independent auditors of companies, appointed by the general assembly among the members of the Institute of Independent Auditors of Companies. The control of small companies must be made by an accountant appointed by the general assembly for definite duration. The conclusion of the independent auditor's report can be:

  • A certificate without reserve, that is to say an approval
  • A certificate with reserves, that is to say that there is approval with reserves because of discords or doubts
  • A refusal to give a certificate

The accountants associations have difficulties getting organized because of the importance of the State in the accounting system.

Labour relations

Labour relations have been peaceful since the 1930s. Most industrial workers are organized by unions linked to one of the major political parties. Representatives of business, unions, and government participate in the conduct of major labour negotiations.

Foreign investors often cite Luxembourg's labour relations as a primary reason for locating in the Grand Duchy. Unemployment in 1999 averaged less than 2.8% of the workforce, but reached 4.4% by 2007.

Energy
Main article: Energy in Luxembourg

In 1978, Luxembourg tried to build a 1,200 MW nuclear reactor but dropped the plans after threats of major protests.[32] Currently, Luxembourg uses imported oil and natural gas for the majority of its energy generation.[33]

Spaceflight and space resource extraction

Luxembourg is a member of the European Space Agency[34] where Luxembourg contributed 23 million Euros in 2015.[35]

The world's biggest satellite operator (SES Global) has its origin and headquarters in Betzdorf, Luxembourg.[36]

In February 2016, the Government of Luxembourg announced that it would attempt to "jump-start an industrial sector to mine asteroid resources in space" by, among other things, creating a "legal framework" and regulatory incentives for companies involved in the industry.[37][38] By June 2016, announced that it would "invest more than US$200 million in research, technology demonstration, and in the direct purchase of equity in companies relocating to Luxembourg."[39] By April 2017, three space mining corporations had established headquarters established in Luxembourg.[40]

Luxembourg's new law took effect in August 2017, ensuring that private operators can be confident about their rights on resources they extract in space. The law provides that space resources can be owned by anyone, not just by Luxembourg citizens or companies."[41]

Transportation

Luxembourg has efficient road, rail and air transport facilities and services. The road network has been significantly modernised in recent years with 147 km of motorways connecting the capital to adjacent countries. The advent of the high-speed TGV link to Paris has led to renovation of the city's railway station while a new passenger terminal at Luxembourg Airport has recently been opened. There are plans to introduce trams (first core line operative in end 2017) in the capital and light-rail lines in adjacent areas within the next few years. The airport has known a sustained growth in passenger numbers during the last years ( 2015: 2.7 mio, 2020 : 4 mio expected), and the second stage of expansion is on its way.

Prospects

According to a note from the Luxembourg statistical agency, the Luxembourg economy was set to grow 4.0% in 2011. The economic situation was particularly dynamic in late 2010 and early 2011 but there were signs of a slowdown, both in the international economic environment and in terms of national indicators.[42] GDP growth was set to enter a recession in 2012.[43]

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See also

References
  1. "World Economic Outlook Database, April 2019". IMF.org. International Monetary Fund. Retrieved 29 September 2019.
  2. "World Bank Country and Lending Groups". datahelpdesk.worldbank.org. World Bank. Retrieved 29 September 2019.
  3. "Population on 1 January". ec.europa.eu/eurostat. Eurostat. Retrieved 13 July 2020.
  4. "World Economic Outlook Database, October 2019". IMF.org. International Monetary Fund. Retrieved 16 October 2019.
  5. "World Economic Outlook Database, April 2020". IMF.org. International Monetary Fund. Retrieved 17 April 2020.
  6. "The World Factbook". CIA.gov. Central Intelligence Agency. Retrieved 25 May 2019.
  7. "People at risk of poverty or social exclusion". ec.europa.eu/eurostat. Eurostat. Retrieved 16 October 2019.
  8. "Gini coefficient of equivalised disposable income - EU-SILC survey". ec.europa.eu/eurostat. Eurostat. Retrieved 16 October 2019.
  9. "Human Development Index (HDI)". hdr.undp.org. HDRO (Human Development Report Office) United Nations Development Programme. Retrieved 11 December 2019.
  10. "Inequality-adjusted HDI (IHDI)". hdr.undp.org. UNDP. Retrieved 22 May 2020.
  11. "Labor force, total - Luxembourg". data.worldbank.org. World Bank. Retrieved 1 November 2019.
  12. "Employment rate by sex, age group 20-64". ec.europa.eu/eurostat. Eurostat. Retrieved 25 May 2019.
  13. "Unemployment by sex and age - monthly average". appsso.eurostat.ec.europa.eu. Eurostat. Retrieved 2 July 2020.
  14. "Youth unemployment rate". data.oecd.org. OECD. Retrieved 3 April 2020.
  15. "Ease of Doing Business in Luxembourg". Doingbusiness.org. Retrieved 21 November 2017.
  16. "Euro area and EU27 government deficit both at 0.6% of GDP" (PDF). ec.europa.eu/eurostat. Eurostat. Retrieved 28 April 2020.
  17. "Sovereigns rating list". Standard & Poor's. Retrieved 26 May 2011.
  18. Rogers, Simon; Sedghi, Ami (15 April 2011). "How Fitch, Moody's and S&P rate each country's credit rating". The Guardian. Retrieved 31 May 2011.
  19. "Scope assigns AAA to Luxembourg with Stable Outlook". Scope Ratings. Retrieved 19 October 2018.
  20. "Luxembourg", CIA – The World Fact Book. Retrieved 8 September 2010.
  21. "Pierre Gramegna: Scholdespiral gebrach a Staat stellt an". RTL.lu. 13 October 2016. Retrieved 12 January 2018.
  22. "The World Factbook". Central Intelligence Agency. 20 June 2014. Retrieved 16 November 2014.
  23. "The Global Financial Centres Index 21" (PDF). Long Finance. March 2017. Archived from the original (PDF) on 11 June 2017.
  24. Transparency International, 2008
  25. "Country profile: Luxembourg". BBC. 8 November 2011. Retrieved 31 December 2018.
  26. "Luxembourg and Belgium removed from 'grey list'". European voice. 29 July 2009.
  27. Luxembourg Company Registration Healy Consultants Retrieved 3 September 2013.
  28. "Lux is the place to be for business travellers", News 352, 10 February 2011. Retrieved 14 February 2011.
  29. "Bulletin du Statec n°6-2010". (in French) Retrieved 14 February 2011.
  30. "La saison touristique 2010 : une stabilisation à bas niveau", Ministère des Classes moyennes et du Tourisme. (in French) Retrieved 14 February 2011.
  31. "Report for Selected Countries and Subjects". www.imf.org. Retrieved 7 October 2018.
  32. "Reactors." Wise – Nuclear issues information services. July 1978. <http://www10.antenna.nl/wise/index.html?http://www10.antenna.nl/wise/b2/reactors.html>
  33. "LUXEMBOURG – Energy Mix Fact Sheet." Europa. January 2007. "Archived copy" (PDF). Archived from the original (PDF) on 19 December 2008. Retrieved 25 September 2008.CS1 maint: archived copy as title (link)
  34. "About ESA - Romania accedes to ESA Convention". ESA. Archived from the original on 15 January 2012. Retrieved 14 January 2012.
  35. "ESA Budget for 2015". esa.int. 16 January 2015.
  36. "Our History". SES - Beyond Frontiers. SES. Retrieved 23 January 2018.
  37. de Selding, Peter B. (3 February 2016). "Luxembourg to invest in space-based asteroid mining". SpaceNews. Retrieved 6 February 2016. The Luxembourg government on 3 Feb. announced it would seek to jump-start an industrial sector to mine asteroid resources in space by creating regulatory and financial incentives.
  38. "Luxembourg plans to pioneer asteroid mining". ABC News. 3 February 2016. Retrieved 8 February 2016. The Government said it planned to create a legal framework for exploiting resources beyond Earth's atmosphere, and said it welcomed private investors and other nations.
  39. de Selding, Peter B. (3 June 2016). "Luxembourg invests to become the 'Silicon Valley of space resource mining'". SpaceNews. Retrieved 4 June 2016.
  40. http://www.spaceresources.public.lu/en.html
  41. https://www.ft.com/content/78e8cc84-7076-11e7-93ff-99f383b09ff9
  42. "Business and Economy", Embassy of Luxembourg in Washington. Retrieved 8 September 2011.
  43. "Growth in 2012", Which economies will grow and shrink the fastest in 2012?. The Economist online 4 January 2012.

Further reading
  • Kirsch, R. (1971). La croissance de l’économie luxembourgeoise. Luxembourg City.
  • Bauler, A. (2001). Les fruits de la souveraineté nationale. Essai sur le développement de l’économie luxembourgeoise de 1815 à 1999: une vue institutionnelle. Luxembourg City.
  • Leboutte, R.; Puissant, J.; Scuto, D. (1998). Un siècle d’Histoire industrielle (1873–1973). Belgique, Luxembourg, Pays-Bas. Industrialisation et sociétés. Brussels.
  • Majerus, Benoît & Benjamin Zenner (2020) "Too small to be of interest, too large to grasp? Histories of the Luxembourg financial centre." European Review of History
  • Margue, P.; Jungblut, M.-P. (1990). Le Luxembourg et sa monnaie. Luxembourg City.
  • Trausch, G.; de Vreese, M. (1995). Luxembourg et les banques. De la révolution industrielle au 7e centre financier mondial. Luxembourg City.
  • Trausch, Gérard (July 2012). Les mutations économiques et sociales de la société luxembourgeoise depuis la révolution française (PDF). Cahiers économiques (in French). Luxembourg City: STATEC.
  • Weber, P. (1950). Histoire de l’économie luxembourgeoise. Luxembourg City.
  • Wey, C., ed. (1999). L’économie luxembourgeoise au 20e siècle. Luxembourg City.

Notes
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