Securing a dynamic and green economy 17 NOVEMBER 2022 @OECDeconomy @OECD Web: oe.cd/Luxembourg
LUXEMBOURG ECONOMIC SURVEY
Luxembourg’s economy has been resilient
Real GDP Index 2019Q1 = 100
Economic Survey of Luxembourg 2022
Source: OECD Economic Outlook (database).
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Russia’s war of aggression against Ukraine is weighing on growth
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3 2021 2022 2023 Gross domestic product 5.1 1.7 1.5 Private consumption 9.4 2.8 2.0 Unemployment rate 5.7 4.8 5.0 Consumer price index (HICP) 3.5 8.2 4.0 Fiscal balance (% of GDP) 0.8 -0.2 -2.2 Public debt (% of GDP) 24.6 27.0 30.5 Source: OECD Economic Outlook 111 projections with revisions reflecting recent economic
Economic Survey of Luxembourg 2022
developments.
The labour market is tight
Economic Survey of Luxembourg 2022
Note: Last observation: 2022Q (job vacancies); 2022Q3 (unemployment rate)
Source: OECD, and Eurostat.
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Inflation is high
Inflation (harmonised) Y-o-y % changes
Economic Survey of Luxembourg 2022
Source: Eurostat, Harmonised Consumer Prices (database).
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Policy support is tilted towards non-targeted measures
Budget measures
2022-23, % of 2022 GDP2
Economic Survey of Luxembourg 2022
1. Targeted measures are directed at households or firms, based on criteria such as income or energy consumption levels. 2. 2022 GDP is based on an OECD forecast. Source: Ministry of Finance, Draft Budget Plan 2023, OECD estimates.
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House price inflation has been high
Nominal house prices Index 2017=100, s.a.
Economic Survey of Luxembourg 2022
Source: OECD Analytical House Price Indicators.
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REFORMING THE PENSION SYSTEM AND LABOUR MARKETS
Economic Survey of Luxembourg 2022
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Absent pension reform, spending on pensions will rise considerably
Gross public spending on pensions, % of GDP
Economic Survey of Luxembourg 2022
Source: European Commission, The Ageing Report 2021.
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More needs to be done to keep people in the workforce
Labour force participation rate
%, 55 64 year olds, 2020
Economic Survey of Luxembourg 2022
Source: OECD, Labour force participation rate (database).
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Youth unemployment is relatively high
Youth unemployment rate
15-24 year olds, 2021Q4
Economic Survey of Luxembourg 2022
Source: OECD, Labour Force Statistics (database).
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BOOSTING PRODUCTIVITY GROWTH
Economic Survey of Luxembourg 2022
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Higher productivity and investment could sustain growth
% point contributions to potential growth
Economic Survey of Luxembourg 2022
1. The combined contribution from increases in the employment rate and the working age population. Labor efficiency measures the contribution from combining labor and capital to potential growth.
2. 2022 data are forecast.
Source: OECD Economic Outlook (database).
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Investment in research and development lags behind
Gross domestic expenditure on R&D % of GDP
Economic Survey of Luxembourg 2022
Source: OECD Main Science and Technology Indicators.
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Small and medium enterprises could make greater use of digital technologies
Firms adopting a certain technology
% of firms adopting
Economic Survey of Luxembourg 2022
Source: OECD, ICT Access and Usage (database).
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Regulatory restrictions are high
Overall Product Market Regulation (PMR) indicator
Index scale (0-6) from the most to the least competition friendly (6=most restrictive)
Economic Survey of Luxembourg 2022
Source: OECD 2018 PMR database.
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SECURING THE GREEN TRANSITION
Economic Survey of Luxembourg 2022
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Progress in reducing emissions must accelerate
Greenhouse gas emissions Mt Co2 eq.
1 ESD = Effort Sharing Directive. These emissions are covered by the EU Effort Sharing Directive and are not part of the EU Emissions Trading Scheme.
Source: Eurostat, Effort Sharing Directive emissions and Air emissions accounts.
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Economic
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Survey of Luxembourg 2022
Carbon prices need to rise in the medium and long term
Carbon Pricing Score at EUR 60 per tonne 0-100, 2018
Economic Survey of Luxembourg 2022
Source: OECD Effective Carbon Tax Rates.
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Luxembourg’s biodiversity is under threat
Species conservation status
Share by status, %
Economic Survey of Luxembourg 2022
Source: European Environment Agency.
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Summary• Support vulnerable households with targeted and temporary measures - to manage the impact of the energy crisis and maintain incentives for energy savings.
• Increase retirement ages through pensions reform and lifelong learning - to ensure fairness for younger workers in the future and to reduce the resource needs of the workforce
• Encourage higher R&D investments and faster take up of digital technology for small and medium sized business by matching public funding for private investment – to support living standards and the sustainable use of resources
• Strengthen signals for sustainable agriculture – to reduce emissions, fertilizer use and encourage greater biodiversity
• Introduce a medium- and long-term carbon-pricing path, together with adequate support for vulnerable firms and households – to encourage investments to reduce fossil fuels consumption
• Raise housing supply whilst densifying homes and gradually raising the cost of road use – to support plans to lower car use, raise homes’ energy efficiency and reduce the resources required by growth
Survey of Luxembourg 2022
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Economic
For more information
Disclaimers:
The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law
This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.
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