2006 OECD Economic Surveys: Luxembourg 2006

image of OECD Economic Surveys: Luxembourg 2006

This 2006 OECD review of Luxembourg's economy examines the challenges Luxembourg is facing with regard to slowing economic growth, public finances, employment, education achievement and product market competition. It finds that Luxembourg has regained its footing after a slowdown at the start of the decade and that the financial servies sector, which accounts for one-third of economic activity, has renewed confidence. But there is deterioration in the fiscal position, weakening of the pension system, and growing unemployment all of which could be improved through enhanced human capital development and strengthened product market competition.

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Assessment and Recommendations

The economy has regained its footing after the disruptive events at the start of the century, and is currently undergoing a sustained recovery. Output growth rose to around 4% in both 2004 and 2005, which is near the trend rate, and the short-term outlook is one of continued dynamic growth in 2006. The financial services sector (which represents around 30% of value-added) has recovered from the bursting of the stock market bubble, with investors regaining confidence in equity markets.

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