Commission upgrades Luxembourg economic outlook

View of Luxembourg City Photo: Shutterstock

View of Luxembourg City Photo: Shutterstock

The European Commission in its autumn economic forecast expects a strong rebound of Luxembourg’s economy this year and for unemployment to gradually decrease in 2022 and 2023.

In its quarterly update on the EU’s economy, the commission on Thursday upgraded its outlook from its summer estimate. In July, it has said Luxembourg’s gross domestic product (GDP) would grow 4.8% in 2021 and 3.3% next year.

The EU executive now expects growth of 5.8% for this year and 3.7% in 2022, slowing down to 2.7% in 2023. “Economic growth is set to rebound strongly in 2021,” it said in a report, citing an uptick in private consumption, investment and a positive outlook on export and financial markets.

At the same time, inflation should slow from 3.2% this year to 2.2% next year and 1.8% in 2023.

“Bankruptcy and unemployment levels are not projected to be affected by the gradual withdrawal of support measures, but this still represents a downside risk to the outlook,” the commission said.

On Wednesday, national statistics office Statec said bankruptcies were lower than before the pandemic, reaching a four-year low in October, when 78 businesses were declared bust, compared to 153 in 2020, 124 in 2019 and 85 in 2018.

Unemployment should decrease as the economy recovers, dropping from 6.1% this year to 5.8% next year and 5.7% in 2023. And public debt should shrink as well, from 25.9% of GDP this year to 25.4% by 2023.

Finance minister Pierre Gramegna (DP) presenting next year’s budget said that investments must be kept high, warning that austerity politics would not be the right solution. The deficit and public debt would shrink, he said.

“Public investment is projected to remain high on the back of sizeable transport infrastructure projects and of support for the green and digital transition,” the commission said in its forecast.

Across the EU, the commission expects slightly slimmer growth--5% this year, 4.3% next year and 2.5% in 2023.