Inflation has eased to low rates
Source: Eurostat.
Growth is projected to increase relative to last year
Real GDP growth, %
Headline inflation, %
Unemployment rate, %
Fiscal balance, % of GDP
Source: OECD Economic Outlook (database).
Securing the pension system for future generations
Acting now would prevent large increases in pension contributions in the future
Note: The scenario “Current rules” is based on the rules of the 2012 pension reform, with the end-of-year allowance being abolished in 2033 (as the contribution rate is raised, triggering an automatic adjustment).
Source: Inspection Générale de la Sécurité Sociale on request of the OECD.
Accelerating the reduction in the pension replacement rate would contain expenditure
Notes: The future pension replacement rate is calculated for currently 22-year-old workers with average earnings and a full career from age 22. Source: OECD Pensions at a Glance database; and OECD Income Distribution Database. Future gross pension replacement rate For currently 22-year-olds at the future retirement age
Optimising tax revenues
Reinvigorating productivity growth
Labour
productivity is high but has declined
Note: Labour productivity growth is measured as the growth rate of GDP per hour worked.
Source: OECD National Accounts database. Labour productivity growth Average annual % change, 2010-2023
Strengthening competition is important for boosting productivity growth
OECD economy-wide Product Market Regulation indicator
Index scale ranging from 0 (most competition-friendly) to 6 (least competition-friendly), 2023
Source: OECD Product Market Regulation database.
Government support for business research and development
% of GDP, 2023
Source: OECD Main Science and Technology Indicators (database).
Improving the quality of adult training would boost the supply
Source: Eurostat.
Advancing the green transition
Full implementation of the National Energy and Climate Plan is needed to reduce emissions towards targets
Greenhouse gas emissions
Carbon dioxide equivalent (CO2e), Kilo tonnes
target
With existing measures (31 December 2021)
With additional measures (National Energy and Climate Plan)
Climate Law objectives
Observed emissions
Note: The scenario “With existing measures” shapes the reduction path by taking into account only the policy measures adopted until 31 December 2021. The scenario “With additional measures (National Energy and Climate Plan)” models the emissions reduction path under the hypothesis that all the measures contained in the National Energy and Climate Plan were to be fully and timely implemented. Emissions from the European Union Emissions Trading Scheme and from land use, land-use change and forestry are included from 2030 onwards.
Source: STATEC (National Institute for Statistics and Economic Studies).
Strengthening public transport by increasing capacity and expanding the network would help lower emissions Emissions by sector
Source: Eurostat.
Note: Data refer to February 2025.
Source: CEIC data.
Main structural reform recommendations
A comprehensive reform to curb pension expenditure and raise revenue is needed in the near term to secure the system for future generations and more disruptive changes further into the future.
Gradually transitioning to individual income taxation and implementing the planned surtax on unoccupied land would make the tax system more growthfriendly.
Strengthening competition, especially in services, refocusing public support for innovation, and boosting skills by upgrading training would help to reinvigorate productivity growth.
Continuing to develop public transport and alternative mobility options, while bringing fuel prices more in line with those in neighbouring countries, would help Luxembourg reach its climate targets.
Productivity
https://oe.cd/luxembourg
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