2019 OECD Economic Surveys: Luxembourg 2019

image of OECD Economic Surveys: Luxembourg 2019

Luxembourg is one of the most prosperous economies in the OECD. However, prosperity and quality of life cannot be taken for granted. This Survey focuses on three main challenges. The first concerns housing: strong population growth and supply constraints have made prices surge, which worsens affordability and creates vulnerabilities for some households and some banks. Tackling housing supply constraints and increasing the supply of social rental housing are key to improving housing affordability. The second challenge is reviving productivity growth, which will require supporting viable non-frontier firms to catch up and to help frontier firms to innovate more. The third challenge is to achieve a more sustainable and inclusive growth. This would require, among other measures, fiscal reforms to address rising pension expenditure and tilt revenues towards environmental and property taxation.


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Key Policy Insights

Luxembourg is one of the most prosperous economies in the OECD. Thanks to overall sound policies and institutions, the financial sector remains competitive and has made inroads into new areas, such as fintech and green finance. Dynamic job creation has reduced unemployment and enabled Luxembourg to integrate numerous immigrants, who have become an essential pillar of the labour force while embracing the opportunity of a better life. A very large number of residents in neighbouring countries have also found work in Luxembourg, illustrating the high interconnectedness of the economy. The strong fiscal position is well illustrated by a long-standing AAA rating and the large accumulation of government financial assets.

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