The national statistics bureau modelled two scenarios.

The first, “limited confinement”, assumes the lockdown is mostly lifted and normal economic activity resumes by the end of June. In this case, Statec forecast that GDP would contract -6% in 2020, before rebounding +7% in 2021. The unemployment rate would hit 6.7% this year (and would have been 9.7% without the short-time working scheme) and then rise to 7.2% next year.

The second, “prolonged confinement”, hypothesises that a second wave of the virus would require movement restrictions to be reintroduced at some point later this year. Under that scenario, Luxembourg’s GDP would shrink -12.4% in 2020 and only grow +1.8% in 2021. The unemployment rate would hit 7.5% this year and shoot up to 9.5% next year.

Statec released the projections on 29 April. The figures were based on data available up to 23 April and including numbers from Oxford Economics, an advisory firm.

The statistics agency will release updated economic forecasts on 5 May and 11 June.