The medium-term macroeconomic projections cover the period 2022-2026 and were adopted on 15 February. This is before the Ukraine crisis, the medium and long-term impact of which has yet to be determined. 

That said, the Luxembourg statistical office expects growth to slow down to around 2.2% for the period 2024-2026. This slowdown compared to the forecasts for 2022 and 2023 is explained by the fading of the current economic catch-up effect. These levels correspond to the trend rate of the Luxembourg economy and mark the end of an economic expansion cycle that began in the period 2013-2014 after the euro crisis, which will have peaked in 2018-2019 and which will have benefited from the support of public policies in the face of the covid-19 pandemic.

Growth, like within the euro area, will be driven by private consumption. This consumption will draw only slightly on accumulated savings and, the consumption will benefit all market sectors (industry, construction, personal and business services).

The financial sector will be less dynamic, but will benefit from the normalisation of interest rates.

10,000 to 12,000 new jobs per year

By 2026, Statec expects 70,000 new jobs to be created--that is, 10,000 to 12,000 new jobs per year--and an increase in the resident workforce of 30,000 people. Half of these new jobs will be filled by cross-border commuters, whose number should rise to 250,000. “The employment rate would return to the highs of the late 1990s, but not exceed them. It would fall at the end of the period due to the slowdown in job creation,” explains Statec. This dynamic is favourable to the unemployment rate, which Statec sees returning to its pre-financial crisis levels at around 4%.

Building on this momentum, by the end of 2026, Luxembourg will be home to 700,000 inhabitants.

Public finances will continue to remain in balance, even showing a slight surplus under “an unchanged policy,” Statec says.

“On the revenue side, public finances would benefit from the dynamism of the labour market, fuelling the taxes paid by households and social contributions. No risk, neither negative nor positive, resulting from international tax harmonisation on the side of multinational companies has been incorporated into this projection,” Statec says.

Expenditure should increase by around 4% at the end of the period, driven by increases in social benefits, investment and operating costs.

This story was first published in French on . It has been translated and edited for Delano.