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Construction was among the sectors hardest hit by the pandemic after construction sites closed during lockdown. Photo: Matic Zorman 

The country’s economy ground to a halt during a nationwide lockdown that came into effect mid-March and slowly started lifting from 20 April. Restrictions on gatherings and rules on distancing that impact the hospitality and events sectors in particular remain in place.

The government is looking to extend restrictions until the end of the year in a draft law that will be voted in parliament next week.

GDP fell by 7.8% between April and June compared to the same time last year, national statistics office Statec said on Friday. The heaviest losses were in industry--where economic output contracted by 22.4%--retail and hospitality (-21.9%), and construction (-20.3%).

Consumer spending also took a dip, with people spending 19.4% less in the second quarter of this year than in 2019.

In its medium-term forecast, Statec estimates that Luxembourg’s economy will contract by 7.9% in 2020. This outlook is in line with a projection from earlier in the year, when Statec said economic decline could be anywhere between 6-12%.

Recovery should be slower than previously thought though. Whereas Statec in its earlier outlook said GDP would grow by 7% in 2021, this number was lowered to 6.1% in documents published on Friday.

Luxembourg is still on track to outperform other EU countries. European statistics office Eurostat in its 8 September forecast said GDP declined by 14.7% in euro area countries in the second quarter of 2020, compared with 13.9% across the bloc.