Editor’s Note
This article summarizes STATEC’s latest economic outlook, which signals a tentative recovery for Luxembourg’s GDP in 2024 following a 2023 recession. However, the report also projects a challenging labor market, with unemployment expected to continue rising through 2025.
In its first economic outlook note of 2024, STATEC highlights the beginning of an economic recovery but forecasts a continued rise in unemployment until 2025.
For the job market, STATEC’s forecasts for 2024 and 2025 are gloomy.
There is improvement. After entering a recession in 2023, Luxembourg is emerging somewhat at the beginning of 2024, recording a sharp rebound in its GDP, STATEC announced in its economic outlook note presented this Wednesday, June 19.
According to a first estimate by statisticians, Luxembourg’s GDP in volume would have increased by 0.5% during the first quarter of 2024.
This rise in GDP is accompanied by an improvement in business confidence, which has improved significantly since the beginning of the year. Morale is better in the non-financial services, transport, Horeca, and publishing sectors.
Simultaneously, consumption is holding up, notably thanks to indexations which have allowed for wage progression. In the first quarter of 2024, household consumption recorded a 1% decline due to lower purchases of vehicles, cultural products, catering services, and clothing items. However, this decline should be put into perspective with the dynamism of 2023 in terms of consumption, which increased by 4% in Luxembourg compared to 0.6% in the eurozone.
If inflation is receding, tensions persist on service prices. The lifting of tariff shields at the end of 2024 would push inflation upwards again, particularly due to the increase in electricity prices, warns STATEC.
For the job market, the future remains cloudy. Marked by a slowdown in 2023 and 2024 and a simultaneous rise in unemployment, employment will only record a fairly weak evolution in 2024, estimated at 1.3%.
Seemingly stabilized in recent months, the unemployment rate will continue to climb according to STATEC, reaching 5.8% in 2024 and 5.9% in 2025. However, GDP is expected to increase by 1.5% and 3% respectively during these two years.
Regarding public finances, statisticians highlight a marked slowdown in public revenue and expenditure. The public balance has logically been degraded by the economic situation of the last two years and government measures aimed at curbing the effects of inflation. In a context of still high inflation, STATEC forecasts a very weak evolution of public revenue in 2024 (+4%) combined with a slowdown in expenditure due to stagnant investment and moderated employment (+4.8%).
In 2025, the progression of revenue should normalize, with an increase of 6%, and public expenditure should align with similar growth. Among the main sources of the increase in expenditure, STATEC recalls the program for public authorities to purchase housing intended to meet the needs of people with low or moderate incomes.
More broadly, the eurozone is recording a similar dynamic with a modest economic recovery in 2024.
A notable acceleration in growth is expected by statisticians from 2025 onwards, assuming a relaxed monetary policy and inflation that continues to recede.
