Business
Outlook 2011
ROUGH ROAD AHEAD? Luxembourg financial leaders are cautiously optimistic as 2011 gets under way. What challenges and opportunities does the Grand Duchy’s economy face? Text: Aaron Grunwald — Photos: David Laurent/Wide
“I think the key word is uncertainty,” says Alain Kinsch, country managing partner of Ernst & Young Luxembourg, when asked for his outlook on 2011. It was a sentiment shared by other economic leaders interviewed by Delano. Significant challenges face Luxembourg this year--not least of which is a sense the fallout from the economic and financial crisis is not fully complete--and much reform is still needed. Nevertheless, they report the Grand Duchy’s financial centre remains robust and that further economic diversification is starting to take shape. “Consumer confidence is still very low,” affirms Kinsch. “People are saving too much.” However he notes that “Luxembourg GDP is forecast to grow this year by three percent, double the Eurozone average. That is good, but far from the growth we’ve had” in previous years. Yet “Luxembourg still has inherent competitive advantages which other countries can’t copy,” he maintains. Kinsch points out the Grand Duchy became the first country to adapt UCITS IV, the EU’s new investment funds directive, into national law. He also predicts Luxembourg will be first to transpose the Directive on Alternative Investment Funds Managers when the final text is
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Keith O’Donnell: wants Luxembourg to develop more high-value-add offerings
agreed this year. Such speed will help the country remain a major funds centre, he reckons. At the same time, “we clearly need to reinvent private banking,” says Kinsch. “The clientele has changed.” He continues: “It’s a new environment. New clients will come for top-line services” and not banking secrecy. He also expects a shakeout in the sector. “There will be fewer private banks in the future, not more. Some will no longer be profitable,”
he predicts, since the emerging middle market client-base provides banks with lower margins than the disappearing high-end customer pool. In response, “some banks will concentrate on the EU, and some will focus on new markets such as Brazil, Latin America, China and the Middle East.” Growing Diversification Outside of finance, Kinsch would like to see the Grand Duchy build more