Luxembourg

Capital: Luxembourg

Local time:
It is %T:%M %A in Luxembourg

GDP growth rate: 2.7% in 2013

FDI stock: 114 691 million USD in 2010

Economic trends

Luxembourg’s economy is characterized 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 it very vulnerable to the international economic crisis. While during the last recent years, the country was obtaining an average growth rate of around 5% per year; in 2008, Luxembourg went into recession. In 2009, its growth stabilized to reach 2.7% in 2010 and 3.6% in 2011. Strong domestic demand and rising public investment explain the country's good performance, which set it above the European average in 2011. In 2011, unemployment was 4.7%, after it had exceeded 6% of the total workforce in 2009. 

In addition, the public dept reached 20% of the GDP in 2011. 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.

In 2012, the country expects a continued growth of around 3% and its budget remains on a very rigorous policy which controls public expenditures.  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.

Main branches of industry

The agricultural sector is not well developed. It contributes only 0.4% to the GDP and employs less than 1.5% of the active population. The country's main crops are wine, wood, cereals and potatoes.
The industrial sector (16% of the GDP in 2011), 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 contributes around 10% to the GDP.

Like all developed countries, a large part of the GDP is attributed to the tertiary sector. This sector represents almost 83% of the national wealth, and more than half of it, is 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.

International trade

Luxembourg performs almost 90% of its foreign trade with the EU countries. 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).

The country's three main trade partners (both for imports & exports) are: Germany, France and Belgium, Germany being the largest client and Belgium the largest supplier. 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.