On Thursday 29 June, the European Central Bank released its most recent macroeconomic forecasts for the euro area member countries. Pictured ECB building in Frankfurt, Germany. Photo: Shutterstock

On Thursday 29 June, the European Central Bank released its most recent macroeconomic forecasts for the euro area member countries. Pictured ECB building in Frankfurt, Germany. Photo: Shutterstock

The European Central Bank has projected Luxembourg’s real GDP for 2023 at 1.8%, a 20 basis point improvement compared to the 1.6% projected in its Spring 2023 economic forecast.

According to the European Central Bank’s macroeconomic projections released on Thursday 29 June, Luxembourg’s real GDP growth for 2023 is estimated at 1.8%, showing a 20 basis point increase from the previous December 2022 forecast, which projected a growth rate of 1.6%. The ECB publishes projections twice a year, in June and December, to anticipate economic growth, inflation and unemployment rates for member states.

In contrast, Luxembourg’s statistical bureau, Statec, for the country’s economic growth to +1.5% for 2023.

Real GDP

For 2023, the ECB expects Luxembourg’s real GDP growth to remain modest at 1.8% before recovering to 2.4% in 2024. In the fourth quarter of 2022, real GDP contracted by 3.8% quarter-on-quarter due to declines in private consumption, exports and investment, particularly in the construction sector.

The financial sector also experienced significant weakening, with a substantial drop in value added (-10.8% uarter-on-quarter), primarily driven by volatility and a decline in the market valuation of financial assets. In 2022, GDP growth reached 1.5% year-on-year, supported by both private and public consumption.

Household consumption

For 2023, private consumption growth is expected to rebound, supported by the utilisation of excess savings and additional government support measures. Domestic demand will also be strengthened by the growth in government consumption, driven by higher compensation for employees and intermediate consumption.

However, investment is predicted to remain weak due to rising interest rates, which will limit borrowing capacity and demand for mortgages.

In 2024, with an expected GDP growth rate of 2.4%, the economy is anticipated to return to its pre-pandemic growth trajectory, primarily supported by investment recovery and a further positive contribution from net exports.


Following the economic slowdown in 2023, the labour market is forecasted to slightly weaken but remain resilient. Employment growth is expected to decline from 3.5% in 2022 to 2.4% in 2023 and further to 2.3% in 2024.

Unemployment, which decreased to 4.6% in 2022, is projected to increase moderately to 4.8% in 2023 and 5.0% in 2024.

These changes can be attributed to the persistently high job vacancy rate and improved employment prospects in sectors such as construction.


Headline inflation, which reached a record high of 8.2% in 2022 due to energy and food price increases, is anticipated to moderate over the forecast horizon.

This is expected due to assumed lower energy prices supported by the Solidaritéitspak, the government’s cost-of-living support scheme.

Consumer price inflation is thus expected to decrease to 3.2% in 2023 and 2.6% in 2024.

On the other hand, core inflation is forecasted to rise from 4.4% in 2022 to 5.1% in 2023, reflecting higher wages and non-industrial goods prices.

However, in 2024, core inflation is projected to decline to 3.2% following a decline in all its components.

Government finances

In 2022, government finances recorded a small surplus of 0.2% of GDP, primarily driven by high revenue growth resulting from a strong labour market and high inflation-related tax income, the ECB said.

However, in 2023, the government balance is expected to turn into a deficit of 1.7%.