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flag Luxembourg Luxembourg: Economic and Political Outline

In this page: Economic Indicators | Foreign Trade in Figures | Sources of General Economic Information | Political Outline

 

Economic Indicators

Luxembourg’s economy is characterised by an attractive taxation system and a high degree of international openness. The financial sector alone represents almost half of the total GDP of the country, making the country very vulnerable to the international economic crisis. While the country was reaching an average annual growth rate of around 5% before the crisis, Luxembourg went into recession in 2008. The economic activity then suffered - as everywhere else in the Eurozone - from the regional crisis in 2012. After a negative growth that year (-0.2%) modest growth came back in 2013 (1.9%) with estimations of 1.8% in 2014.

Strong domestic demand and rising public investment explain the country's good performance. Unemployment went from 6% in 2012 to 5.8% in 2013.

In addition, the public debt reached 20% of the GDP again in 2013. Luxembourg has the highest GDP per capita in the European Union. The competitiveness of Luxembourg's companies is also one of the highest in the world.

Luxembourg budget remains on a very rigorous policy which controls public expenditures since 2012.  This budget should allow the country to rapidly recover its economy, which, in spite of all, is still very dependent of the global economy.

The Grand Duchy is currently seeking to diversify its economic activities, focusing on the knowledge economy, which will showcase the new development center Belval-West, on the border between France and Luxembourg. Public debt and unemployment are the main two concerns of the government.

 
Main Indicators 20112012201320142015 (e)
GDP (billions USD) 58.0655.1760.4063.93e66.01
GDP (Constant Prices, Annual % Change) 1.9-0.22.12.71.9
GDP per Capita (USD) 111,789103,806112116,752118,251
General Government Balance (in % of GDP) 0.30.90.60.4-1.3
General Government Gross Debt (in % of GDP) 18.721.723.1e24.226.5
Inflation Rate (%) 3.72.91.7e1.1e2.1
Unemployment Rate (% of the Labor Force) 5.76.16.97.16.9
Current Account (billions USD) 3.863.213.14e3.29e2.64
Current Account (in % of GDP) 6.65.85.2e5.1e4.0

Source: IMF - World Economic Outlook Database , Last Available Data

Note: (e) Estimated Data

Main Sectors of Industry

The agricultural sector is not well developed. It contributes only 0.3% to the GDP and employs less than 1.2% of the active population. The country's main crops are wine, wood, cereals and potatoes.

The industrial sector (13.3% of the GDP in 2013 and 13% of the active population), has historically been dominated by the production of iron and steel. In these recent years, this trend was diversified, thus chemical factories, plastic products and light engineering have been added. The steel industry still contributes to around 10% to the GDP.

Like all developed countries, a large part of the GDP is attributed to the tertiary sector. This sector (employing 86% of the active population) has represented almost 86.4% of the national wealth in 2013, with more than half of it attributed exclusively to financial and real estate services. Luxembourg is one of the world's largest money markets and the second largest investment fund manager in the world.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 1.3 12.4 84.1
Value Added (in % of GDP) 0.3 12.2 87.5
Value Added (Annual % Change) -6.4 -6.1 2.8

Source: World Bank - Last Available Data.

 
 
 
Monetary Indicators 20092010201120122013
Euro (EUR) - Average Annual Exchange Rate For 1 USD 0.720.760.720.780.76

Source: CIA - The world factbook - Last Available Data.

 
 

Learn more about Market Analyses about Luxembourg on Globaltrade.net, the Directory for International Trade Service Providers.

Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labor freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.

Score:
74.2/100
Position:
Mostly Free
World Rank:
16/178
Regional Rank:
7/43

Distribution of Economic freedom in the world
Source: 2014 Index of Economic freedom, Heritage Foundation

 
 

Country Risk

See the country risk analysis provided by Coface.

 

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Foreign Trade in Figures

Luxembourg performs almost 90% of its foreign trade with the EU countries. In 2014, Luxembourg offers a favorable climate to foreign investment. The share of foreign trade in the country’s GDP is around 300%. The trade deficit remains constant in Luxembourg's current economy.

In recent years, Luxembourg has significantly expanded the sector of insurance, especially by introducing the Freedom of Services (LPS) principle for other EU member states. It also seeks to diversify its economy, too dependent on the financial sector: it tries to develop its strengths in order to position itself as a media center and new information and communication technologies hub, and to attract electronic services businesses, especially e-commerce as the Grand Duchy has a VAT rate of 15%, which is very attractive for implementations of third country companies in Europe (e.g. Amazon, Microsoft, AOL or E-Bay).

In 2013 the country's three main trade partners (both for imports & exports) remained: Germany, France and Belgium, Germany being the largest client (21%) and Belgium the largest supplier (30%). Luxembourg mainly exports iron & steel, electric and electronic equipment, machinery and plastics. The country's main imports are mineral fuels & oil, vehicles, electric & electronic equipment, machinery, iron and steel.

Luxembourg has accomplished a diversification of its exports outside the European Union and the country currently has trade relations with Asian and Middle Eastern countries. The country has a trade balance surplus and this comes from its high value-added exports.

 
Foreign Trade Indicators 20092010201120122013
Imports of Goods (million USD) 24,51425,09229,31827,43126,965
Exports of Goods (million USD) 21,11419,74821,86619,44719,461
Imports of Services (million USD) 35,51837,30242,27842,16248,010
Exports of Services (million USD) 59,92463,03371,25771,73978,826
Imports of Goods and Services (Annual % Change) -14.09.66.93.85.8
Exports of Goods and Services (Annual % Change) -12.78.25.02.95.6
Imports of Goods and Services (in % of GDP) 135.3147.1152.0159.5168.1
Exports of Goods and Services (in % of GDP) 168.2180.7185.2193.4203.3
Trade Balance (million USD) -4,848-5,528-7,461-8,396-8,358
Trade Balance (Including Service) (million USD) 19,86920,66021,86121,57623,327
Foreign Trade (in % of GDP) 303.5327.7337.2352.9371.4

Source: WTO - World Trade Organization ; World Bank , Last Available Data

 

Main Partner Countries

Main Customers
(% of Exports)
2013
Germany 27.8%
France 14.7%
Belgium 13.3%
Netherlands 5.2%
United Kingdom 3.5%
See More Countries 35.5%
Main Suppliers
(% of Imports)
2013
Belgium 24.6%
Germany 23.5%
France 12.9%
United States 8.1%
Netherlands 3.7%
See More Countries 27.2%

Source: Comtrade, Last Available Data

 
 

Main Products

- bn USD of products exported in 2013
Angles, shapes and sections of iron or non-alloy...Angles, shapes and sections of iron or non-alloy steel, n.e.s. 7.1%
New pneumatic tyres, of rubberNew pneumatic tyres, of rubber 4.9%
Sheet piling of iron or steel, whether or not...Sheet piling of iron or steel, whether or not drilled, punched or made from assembled elements; welded angles, shapes and sections, of iron or steel 4.3%
Flat-rolled products of iron or non-alloy steel,...Flat-rolled products of iron or non-alloy steel, of a width >= 600 mm, hot-rolled or cold-rolled cold-reduced, clad, plated or coated 3.7%
Motor cars and other motor vehicles principally...Motor cars and other motor vehicles principally designed for the transport of persons, incl. station wagons and racing cars (excl. motor vehicles of heading 8702) 3.3%
See More Products 76.6%
- bn USD of products imported in 2013
Petroleum oils and oils obtained from bituminous...Petroleum oils and oils obtained from bituminous minerals (excl. crude); preparations containing >= 70% by weight of petroleum oils or of oils obtained from bituminous minerals, these oils being the basic constituents of the preparations, n.e.s.; waste oils containing mainly petroleum or bituminous minerals 10.7%
Motor cars and other motor vehicles principally...Motor cars and other motor vehicles principally designed for the transport of persons, incl. station wagons and racing cars (excl. motor vehicles of heading 8702) 7.7%
Powered aircraft e.g. helicopters and aeroplanes;...Powered aircraft e.g. helicopters and aeroplanes; spacecraft, incl. satellites, and suborbital and spacecraft launch vehicles 6.9%
Ferrous waste and scrap; remelting scrap ingots of...Ferrous waste and scrap; remelting scrap ingots of iron or steel (excl. slag, scale and other waste from the production of iron or steel; radioactive waste and scrap; fragments of pigs, blocks or other primary forms of pig iron or spiegeleisen) 3.8%
Cheese and curdCheese and curd 1.6%
See More Products 69.4%

Source: Comtrade, Last Available Data

 
See More Products
More imports (Intracen Data)
More exports (Intracen Data)
 
 
 

Main Services

- bn USD of services exported in 2011
58.58%
14.32%
6.75%
5.29%
4.43%
3.94%
3.61%
1.15%
0.74%
0.65%
0.55%
- bn USD of services imported in 2011
51.67%
18.05%
9.13%
5.13%
4.79%
4.40%
2.26%
2.10%
1.27%
1.05%
0.17%

Source: Comtrade, Last Available Data

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Sources of General Economic Information

Ministries
Ministry of Economy
Ministry of Finances
Statistical Office
The National Statistical Institute of Luxembourg
Central Bank
Central Bank of Luxembourg
Stock Exchange
Luxembourg Stock Exchange
Search Engines
Economic Portals
Economic Portal (in French)

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Political Outline

Executive Power
The chief of the state is the Grand Duke. The monarch is hereditary. Following popular parliamentary elections, the leader of the majority party or the leader of the majority coalition is appointed as Prime Minister by the monarch to serve a five-year term. Prime Minister is the head of the government and enjoys the executive powers which include implementing of the law and running the day-to-day affairs of the country. The Council of Ministers (cabinet) is recommended by the Prime Minister and appointed by the monarch.
Legislative Power
Luxembourg has a unicameral legislature. The parliament consists of Chamber of Deputies which has 60 seats; its members are elected by direct popular vote to serve five-year terms. There also exists a second body called Council of State appointed by the Grand Duke (composed of 21 ordinary citizens recommended by the Prime Minister) which advises the Chamber of Deputies in the drafting of legislation. Grande Duke has constitutional power to dissolve the parliament and reinstate a new one. Prime Minister can only recommend the dissolution of parliament to Grande Duke. Legislative power is vested in both the government and the parliament. The people of Luxembourg enjoy considerable political rights.
Main Political Parties
Luxembourg has a multi-party system. No one party has a chance of gaining power alone, and parties work with each other to form coalition governments. Some of the major political parties in the country are:
-ADR (Alternative Democratic Reform Party) – a conservative nationalist party with anti-Euro ideology;
- CSV (Christian Social People's Party) – a Christian democratic conservative party with pro-Euro ideology;
- KPL or PCL (Communist Party of Luxembourg) – follows communist ideology;
- DP (Democratic Party) – follows liberal political ideology;
- LSAP (Luxembourg Socialist Workers' Party) – social democrats The Greens – supports environmentalism and sustainable society.
Current Political Leaders
Grand Duke: HENRI (since October 2000) - hereditary
Prime Minister: Xavier BETTEL (since 4 December 2013) - Democratic Party
Next Election Dates
Chamber of Deputies: June 2018
 

Indicator of Freedom of the Press

Definition:

The world rankings, published annually, measures the violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire sent to partner organizations,150 RWB correspondents, journalists, researchers, jurists and activists of human rights, including the main criteria - 44 in total - to assess the situation of press freedom in a given country. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).

World Rank:
4/180
Evolution:
same place compared to 2013

Source: Worldwide Press Freedom Index 2014, Reporters Without Borders

 

Indicator of Political Freedom

Definition:

The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.

Ranking:
Free
Political Freedom:
1/7

Map of freedom 2014
Source: Freedom House

 

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Last Updates: January 2015