OECD Economic Surveys: Luxembourg

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1999-0782 (online)
1995-3720 (print)
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OECD’s periodic surveys of Luxembourg’s economy. Each edition surveys the major challenges faced by the country, evaluates the short-term outlook, and makes specific policy recommendations. Special chapters take a more detailed look at specific challenges. Extensive statistical information is included in charts and graphs.

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OECD Economic Surveys: Luxembourg 2010

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10 May 2010
9789264086548 (PDF) ;9789264077324(print)

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OECD's 2010 survey of Luxembourg's economy.  This edition includes chapters covering recovery from the crisis, achieving sustainable improvements in living standards, making the labour market work better and the Luxembourg financial centre and the crisis.
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  • Mark Click to Access
  • Basic Statistics of Luxembourg, 2009
  • Executive summary
    Luxembourg has experienced a severe recession, as it was heavily exposed to the fall in world trade and the international financial crisis. Unemployment has risen and the fiscal position has deteriorated. This follows a long period of continuous and rapid economic expansion during which living standards rose impressively and the economy was transformed by the growing financial centre and large flows of cross-border and migrant workers. While there are encouraging signs of recovery, the future growth path is likely to be weaker than in the recent past reflecting the sluggish international recovery, structural factors and a loss of competitiveness.
  • Assessment and recommendations
    Luxembourg has experienced a severe recession, as its international links exposed it to the financial crisis and the steep fall in world trade. The very open financial and industrial sectors contracted sharply. The financial impact of the crisis has been primarily on internationally-oriented banking and fund management activities. However, there is little evidence of serious credit constraints facing the domestic economy. Luxembourg participated in the cross-border rescue of two financial institutions with extensive local activities, though their local subsidiaries were not at the origin of the problems.
  • Recovering from the crisis
    Luxembourg has experienced a severe recession as the result of the international financial crisis. Output contracted sharply and unemployment has risen. Luxembourg’s economy was heavily exposed to the downturn in world trade and the financial centre has been strongly affected. However, policy support from accommodative euro area monetary policy and a fiscal stimulus package helped stabilise the economy. While recovery is now underway, demand is likely to be held back by a weakness in competitiveness, necessary fiscal consolidation and lower potential output. Growth in the coming years is likely to be lower than before the crisis, although living standards will remain high.
  • Achieving sustainable improvements in living standards
    Luxembourg has achieved rapid and sustained growth over the past 25 years and living standards are the highest in the OECD. However, following the crisis, it now faces the possibility of weaker performance in the years to come even if living standards will remain high. This underlines the importance of structural policies to help boost growth and sustain high incomes. Apart from measures to improve the functioning of the labour market and raise public sector efficiency, there are a number of policy priorities.
  • Making the labour market work better
    Rapid economic growth over the past two decades has substantially increased employment in Luxembourg, which has largely been met by in-flows of cross-border workers and, to a lesser extent, immigration. Unemployment has remained low compared to other European countries. These significant social changes have been absorbed without substantially widening income disparities, facilitated by the generous welfare system made affordable by the strong economy.
  • The Luxembourg financial centre and the international financial crisis
    Over past decades, Luxembourg has emerged as a major international financial centre. This has been crucial to the development of its economy and the financial sector has come to play a large role in economic activity, employment and government revenues. The financial centre is specialised in the management of interbank liquidity for international cross-border banks and asset management activities. The global financial crisis has had a strong impact on the financial sector with a substantial contraction of banks’ balance sheets, mostly related to lower interbank lending, and a fall in the value of assets under management due to the drop in equity prices.
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