Context
1. Luxembourg’s economy entered the hiking cycle in a strong position. The post-pandemic recovery has been stronger than peers. Firms’ profits benefited from robust demand and high inflation and accumulated cash buffers, despite some heterogeneity between and within sectors. A tight labor market, generous fiscal support, and automatic wage indexation boosted households’ real income and savings. Loose monetary and financial conditions supported the financial sector performance and helped maintain capital and liquidity buffers at high levels. In late 2022 however, the recovery started to fade, and financial volatility increased, weighing on economic activity.
2. The newly elected government’s key priorities for 2023–28 are boosting competitiveness and purchasing power. The opposition conservative party (CSV) won the October 2023 elections and formed a coalition with the liberals (DP, part of the former coalition). Because of the election, the budgetary cycle has been delayed. The government’s key priorities focus on reinvigorating growth, including in the real estate sector in the short term, and boosting competitiveness through lower taxation and simplification/modernization of regulation. While some measures have already been implemented in response to the ongoing downturn, the timing and calibration of several measures/reforms has yet to be defined. The post-electoral context and a more challenging than expected external environment have affected the implementation of past IMF advice (Annex I).
Recent Development
Tighter and volatile financial conditions have weighed on the economy, even if supportive fiscal policy and robust real wage growth buoyed consumption. The financial sector has been resilient so far supported by strong profitability, despite some deterioration in asset quality. Weak demand and uncertainty have put pressure on real estate prices, reducing overvaluation, but are raising concerns about more durable supply disruptions.
3. Growth was negative in 2023, with a broad-based slowdown across sectors. Preliminary figures show that real GDP contracted by 1.1 percent in 2023, mainly due to weaker external demand and residential investment. In parallel, robust real disposable income growth has supported consumption, and the households’ saving rate remains 3 percentage point above pre-pandemic levels. The financial sector, construction, and transportation value added have recorded a sharp contraction, partly normalizing from high post-pandemic growth levels. Other sectors such as wholesale, retail, and business service activities have also contracted. However, nominal GDP increased, albeit more moderately than in 2022, supported by higher wages (+10½ percent), while corporate profits have declined on aggregate (-5 percent), despite record strong performance by banks.
Luxembourg: A Cyclical Downturn
Citation: IMF Staff Country Reports 2024, 155; 10.5089/9798400277894.002.A001
4. Labor market pressures are subsiding amidst persistent hiring challenges in some sectors. Large net-job creation has slowed considerably, mainly in construction and manufacturing. Unemployment has risen faster than in peer countries (+0.9 percentage points from its 2022 lows), reaching 5.5 percent at end-2023 (5.6 percent in February 2024)—close to pre-COVID levels. Low-skilled still account for a majority of the unemployed, but the share of middle- and high-skilled labor in total unemployment has increased in recent quarters, in part among immigrants. While there is some resilience in total hours worked, vacancies have fallen by 36 percent and expectations of future employment by firms dropped. At the same time, firms across most sectors continue to face challenges to hire, reflecting persistent skills mismatches, especially in ICT, accounting, and management occupations.
Luxembourg: Early Signs of Weaknesses in the Labor Market
Citation: IMF Staff Country Reports 2024, 155; 10.5089/9798400277894.002.A001
5. Like in other advanced economies, headline inflation has declined, while underlying inflation remained elevated on wage pressure. Headline inflation stood at 3.5 percent at end-2023, down from 5.4 percent a year earlier (3.2 percent in February 2024). Most of the decline is due to the reversal of supply shocks, in particular food and energy. However, services inflation has increased to 4¾ percent, as three consecutive indexations (+2.5 percent each) increased labor costs and the base effect from some administrative price measures dissipated. Hence, core inflation has been persistently elevated at 4 percent y/y, although sequential measures point to some softening since August 2023.
Luxembourg: Softening Inflation Pressures
Citation: IMF Staff Country Reports 2024, 155; 10.5089/9798400277894.002.A001
6. Despite the large cost-of-living-support measures, the fiscal deficit has been lower than expected. The overall deficit widened from 0.4 percent of GDP in 2022 to VA percent in 2023 (the cyclically adjusted deficit, excluding the one-off EU budget contribution, has risen from Vi to 1.1 percent of GDP), due to a rapid increase in the wage bill and discretionary measures of the solidarity packages.1 Overall, revenues increased by 10 percent through December 2023. Buoyant personal income taxes and social security contributions, supported by growth in salaries, higher corporate taxes, partly due to collection of tax arrears, and excises on tobacco and alcohol have more than offset declines in real estate taxes and foregone receipts due to the solidarity packages. The public debt has risen, although it remains low (25¾ percent of GDP in 2023).
Luxembourg: Fiscal Sector
Citation: IMF Staff Country Reports 2024, 155; 10.5089/9798400277894.002.A001
Sources: Statec and IMF staff calculations
7. Luxembourg’s external position is assessed to be stronger than the level implied by medium-term fundamentals. The current account surplus is estimated to have edged down to 6.8 percent of GDP in 2023, mainly driven by declining net exports of services and higher remittances to foreign workers. The net international investment position (NIIP) declined by about 13.2 percentage points of GDP but is expected to strengthen gradually in the medium term and reach pre-pandemic levels. With the caveat that the EBA-lite methodology only partially captures Luxembourg’s specific economic features (a large financial center), staff’s External Balance Assessment (EBA-lite) indicates that Luxembourg’s position is strong, with a current account gap of 3.1 percent of GDP, and an undervalued real effective exchange rate (Annex II).
Luxembourg: External Sector
Citation: IMF Staff Country Reports 2024, 155; 10.5089/9798400277894.002.A001
Note: There have been large upward revisions in the current account surplus for 2018–22, driven by the correction of discrepancies between the national accounts and balance of payments data. These reflect mostly revisions in the services balance and net factor income.
8. The credit cycle has turned, but the monetary policy tightening cycle is expected to be close to the end. Credit to the nonfinancial resident private sector contracted (3 percent y/y at end-2023) for the first time in more than 2 decades, reflecting both demand and supply. New mortgages plummeted due to lower demand for housing and a higher rejection rate by banks. For nonfinancial corporations (NFCs), credit growth also dropped significantly as firms are postponing capital expenditures and are relying on internal sources of funding. Nonetheless, forward-looking indicators suggest positive dynamics, especially for households. Despite a negative credit to GDP gap, the authorities have maintained a positive countercyclical capital buffer (CCyB) at 0.5 percent to support banks’ resilience.
9. A rebalancing in the property sector is underway (Annex VI).
Residential real estate. Several years of rapidly increasing price to income and the recent steep rise in borrowing costs squeezed demand for housing (mortgages), including for buy-to-let. Heightened uncertainty about housing market prospects and expectations of new government support in 2024 further exacerbated the downturn. As a result, house prices declined in an orderly fashion (-14V2 percent y/y in 2023Q4) with some heterogeneity across segments.2 This, coupled with a rapid growth in disposable income, have contributed to reducing the overvaluation to a range of (10–25 percent). The price-to-rent ratio is also declining, with indications that new leases are growing rapidly.
Commercial real estate. Lower yields relative to alternative investments and uncertainty about the sector’s prospects led to frozen transactions in the sector, and prices came under pressure, especially for offices.
Luxembourg: Turning Financial Cycle
Citation: IMF Staff Country Reports 2024, 155; 10.5089/9798400277894.002.A001
10. Overall, the financial sector remains resilient, despite a deterioration in asset quality.
Banks. High interest rates have boosted interest margins and banks’ profitability, which have almost doubled compared to 2022. Overall, capital and liquidity buffers remain at comfortable levels, with CET1 at 23 percent and LCR above 180 percent, but funding costs have been rising along with the pass-through of monetary policy tightening to deposit rates and a shift to term deposits. The weaker economy and higher debt service is affecting asset quality. The NPL ratio has increased, albeit from low levels, to 1.9 percent in 2023Q4 from 1.6 percent a year ago. The increase in NPLs has been larger for domestically oriented banks (2.6 percent in 2023 against 1.8 percent in 2022), which have a higher exposure to the real estate sector, both mortgages and credit to firms.
Investment funds. The net asset value has slightly improved, reflecting favorable valuation effects, but net flows have been negative for a second consecutive year, despite some recovery in late 2023.
Luxembourg: Resilient Financial Sector Amid Emerging Challenges
Citation: IMF Staff Country Reports 2024, 155; 10.5089/9798400277894.002.A001
Outlook and Risks
11. In line with the April 2024 WEO, the main external assumptions are for a soft landing. In the euro area, Luxembourg’s main trading partner, the forecast is for: (i) growth this year to increase slightly (to 0.4 percent) driven by private consumption; (ii) inflation to continue easing; (iii) short-term bond rates to fall to 3.5 percent in 2024 and 2.6 percent in 2025; and iv) long-term bond yields to remain broadly stable at around 2.5 percent. The baseline assumes that the authorities will reduce the corporate income tax by 1 percentage point and adopt automatic indexation of the tax brackets for inflation in 2025. The cost-of-living measures are set to expire at end-2024.
12. Growth is expected to rebound to 1¼ percent and inflation to recede in 2024.
Fiscal support to households (in particular, the adjustment of the income tax brackets for four wage indexation tranches in January 2024 and housing demand measures), high savings, and continued disinflation are expected to maintain robust consumption growth. Appetite for residential investment is forecast to grow moderately, both due to financial incentives and reduced uncertainty (Figure 8). The output gap will continue widening as growth will fall short of potential. Unemployment is likely to increase further, as firms continue to adjust their labor cost in response to pressure on their profit margins. As monetary policy eases and confidence increases, growth is expected to strengthen in 2025 and converge to its potential (slightly over 2 percent, its average over 2015–23) in the medium term. However, achieving the potential growth rate depends on addressing supply side constraints in the economy and maintaining Luxembourg’s attractiveness and competitiveness.
Both headline and core inflation will decline below 3 percent, but core will likely remain somewhat above the ECB’s target. Inflation is expected to rebound to 3.1 percent in 2025, once administrative energy price measures expire, before falling to 2 percent in 2026.
Luxembourg: Household Income
Citation: IMF Staff Country Reports 2024, 155; 10.5089/9798400277894.002.A001
13. The credit to GDP gap is expected to remain negative, despite higher mortgage activity.3 Real credit is foreseen to be broadly stable in 2024 and turn positive thereafter, as demand for mortgages gradually regains momentum from a decade low level at the end of 2023, boosted by government’s housing measures, reduced uncertainty, and looser ECB monetary policy. The evolution of loans to the non-financial corporate sector is more uncertain but is likely to be sluggish in the near term as firms postpone their investment.
Credit Demand (Forward Looking 3 Months)
(Net percentage, balance of opinion)
Citation: IMF Staff Country Reports 2024, 155; 10.5089/9798400277894.002.A001
Sources: ECB bank lending surveyNotes: For credit standards, a positive sign is a net tightening. For demand, a positive sign is a net increase in demand for loans.
14. While softer global financial conditions and lower inflation have improved the outlook, near terms risks are tilted to the downside, mainly due to rising geopolitical tensions. The latter could reignite supply disruptions and commodity price volatility, impeding the disinflationary process with a risk of more entrenched inflation and losses of competitiveness in a context of automatic wage indexation. This would also lead to higher-for-longer interest rates and cause asset repricing and global systemic financial instability, with spillovers to Luxembourg’s economy and financial sector. At the same time, a sharp global slowdown, while potentially accelerating disinflation and interest rate cuts, would dampen growth and employment and affect investors’ confidence with negative impact on banks and investment funds. These scenarios would lead to pressure on fiscal revenues. Also, uncertainty arises from changes in international taxation. Domestically, risks stem mainly from a disorderly correction in the property market, which would cause more difficulties in the construction sector, higher NPLs, and banks’ losses, as shown by the FSAP analysis (Annex III).
Authorities’ Views
15. The authorities broadly agreed on the assessment of outlook and risks. They concurred that 2023 has been a challenging year, emphasizing nonetheless the strength of the initial conditions and the resilience of the economy. They indicated that there are early signs that the cycle is bottoming out and are, overall, confident in the capacity of the economy to rebound in 2024. While agreeing that uncertainty is high, they concurred that the main immediate domestic risk is the real estate sector and noted that they remain vigilant to potential spillovers from rising geopolitical tensions. They see also upside risks associated with the strength of the recovery in financial services, the evolution of saving rates, and the impact of government support measures.
Policy Discussions
The policy mix should aim at efficiently and durably reinvigorating growth, while helping disinflation, and managing vulnerabilities in the real estate sector. A credible gradual fiscal consolidation would help stabilize the debt in the medium term and create additional room for fiscal priorities. Key structural reforms are needed to address longer term challenges, including housing affordability, competitiveness, and ageing population.
A. New Government’s Policy Plans: An Overview
16. In response to the downturn and difficulties in the real estate sector, the new government has deployed a large package to stimulate demand. In February 2024, the new government declared a state of crisis in the construction sector for six months, extending short-term work schemes to firms in the sector, and tabled a mix of temporary and permanent measures to stimulate demand for housing, mainly the buy-to-let segment. The package includes, among others, increasing temporarily the accelerated depreciation rate and other tax incentives for house purchases, as well as raising and extending of the interest payment deductibility thresholds. It was also decided to extend the public purchase program of new residential dwellings until 2027 with a cost of EUR480 million (0.6 percent of 2023 GDP).4 These measures come on top of a package announced by the former government as well as the expected boost to purchasing power from the adjustment to the personal income tax brackets for four indexation tranches.
17. Boosting competitiveness, notably of the financial sector, is a key priority of the new government’s five-year program. To achieve this goal, the authorities pledged to lower the tax burden for corporations by bringing the statutory corporate tax rates down towards the OECD average. The government is also committed to maintaining a high level of investments in the digital and climate transition through public investment, public and private partnerships, and tax incentives. Also, the plan includes a lowering of the subscription tax for active ETFs to harness the benefits of this growing segment. Finally, the coalition program focuses on modernizing state functions and administrative procedures, and strengthening public services, such as health and education.
18. Several other measures are being considered but their design is still unclear. The authorities are considering smoothing the phasing out of administrative energy price measures (set to expire at-end 2024) to reduce potential impact on inflation and purchasing power. They are also exploring options to transition to individual taxation. Other tax cuts are also envisaged to render Luxembourg more attractive for highly-skilled non-resident workers. No compensatory measures have been discussed at this stage.
B. Fiscal Policy: Supporting Efficiently the Recovery While Helping Disinflation and Promoting Equitable and Sustainable Growth
19. Staff project the deficit to widen in 2024 and debt to increase over the medium term, albeit from very low levels. The phasing out of the temporary energy support measures will be gradual and offset by predominately permanent policy measures to support purchasing power, notably a steep adjustment of the income tax brackets for 4 indexation tranches in 2024 and measures to support housing demand.5 The cyclically adjusted deficit excluding the one-off EU budget contribution is expected to widen by 1.1 percentage points to about 1.6 percent of GDP in 2024. Higher profits in the financial sector will help revenue performance in 2024–25 but could prove short-lived due to the adverse impact of higher interest rates on credit activity and provisioning needs, as well as the normalization of net interest margins. In the absence of compensatory measures, the shift from temporary to permanent measures, together with spending pressures related to ageing and military spending, will widen the overall fiscal deficit over the medium-term above debt-stabilizing levels.
Change in the Overall Balance
(Contributions, in percent of GDP)
Citation: IMF Staff Country Reports 2024, 155; 10.5089/9798400277894.002.A001
Sources: National authorities and IMF staff calculations
20. The near-term fiscal stance is broadly appropriate but more targeted and temporary measures would have been preferable. Given the negative output gap, worsening labor market outcomes, high uncertainty in 2024, and large fiscal space, a moderately expansionary policy seems adequate. However, in a context of a rapid growth of households’ real disposable income and consumption, and a saving rate well above pre-pandemic levels, the universal support for purchasing power would benefit disproportionately the most affluent. Therefore, a more targeted and time-bound approach would have been more appropriate and would have helped disinflation. Moreover, some measures to support the real estate sector could have been temporary or conditional on market situation (see below), especially given the likely looser monetary policy stance in coming quarters and structural housing imbalances.6
21. In 2025, as growth strengthens and monetary policy eases, fiscal policy should move into contractionary territory. The authorities should phase out all temporary measures, while cushioning the impact on the most vulnerable, if needed, through targeted transfers. They should avoid measures that distort price signals in a prolonged manner to allow for demand to adjust, notably in residential real estate given still overvalued prices. In case of a negative demand shock, additional fiscal support could be envisaged—mainly through automatic stabilizers and frontloading of public investment. At the same time, should (core) inflation persist at elevated levels, a more contractionary stance accompanied by targeted and temporary relief measures would be needed.
22. Over the medium term, high spending pressures and uncertainty around revenues warrant a more prudent fiscal policy. Luxembourg has substantial fiscal space and public debt is still among the lowest among triple A countries. However, public debt is not expected to stabilize under staff’s baseline, increasing by 6–7 percentage points of GDP in the next five years. In addition, the implementation of some intended reforms and the materialization of fiscal risks mentioned above could lead to a worse public debt outcome. This, together with increasing ageing costs and the need to free up some resources for the digital and climate transitions call for a more prudent fiscal policy. Staff suggest a gradual consolidation of 0.15–0.2 percent annually (compared to the baseline) to stabilize the debt over the medium term.
23. The consolidation should be mainly expenditure driven, with a reprioritization of public spending. Government spending (as a share of GDP) has increased sharply in recent years relative to the average spending over 2011–16 (+8 percentage points of GDP), notably on personnel, transfers, and social benefits (see selected issues paper for details). While this has been in part driven by the pandemic and cost-of-living relief measures, most of the increase is structural. It has been due to increases in compensation of employees (higher number of employees and wages), ageing costs, and discretionary measures. As pressures are expected to continue, there is a need to rationalize public spending, by containing the wage bill, and improve efficiency of social spending. Measures could focus on further means-testing for social benefits (e.g., family benefits), greater efficiency in public spending (such as education and health), and an early reform of the pension system.
24. With spending pressures and uncertainty about revenues, the announced/planned tax measures/reforms should be carefully designed and calibrated to avoid revenue losses.
Personal income tax. Staff welcome the planned transition to individual taxation and the frequent adjustment of the tax brackets for inflation. However, this should be achieved in a budget neutral manner along with a comprehensive review of the tax-benefit system for individuals that aims at enhancing equity and boosting labor supply. The authorities should also refrain from retroactive adjustment of the tax brackets given households’ strong financial position.
Corporate taxes. The government’s pledge to reduce the statutory corporate income tax (CIT) rate to bring it to the OECD average, all things equal, could erode revenues, without necessarily attracting new investments. It would also benefit mostly very few taxpayers, given the concentration of corporate taxes. Instead, targeted tax incentives to promote investment in R&D, green transition, and digitalization would be more effective in enhancing productivity and long-term sustainability.
Property taxation. The authorities should expedite the establishment of land taxation. The decision to increase caps in interest payment deductibility could have unintended distributional consequences and longer-term impact on house prices and financial stability. Accordingly, the authorities should consider gradually phasing it out.7
25. A well-designed national fiscal framework, complementing the EU Economic Governance Framework, will help better anchor fiscal policy. The new EU fiscal framework is not binding for “safe” countries like Luxembourg with debt level and fiscal deficit below 60 percent and 3 percent of GDP, respectively. Thus, complementing the EU rules with a national fiscal framework would better anchor fiscal policy, given that the self-imposed notional debt limit of 30 percent has been discontinued. The authorities’ commitment to the AAA rating and their intention to adopt a medium-term objective (MTO) as an anchor to fiscal policy is a step in the right direction. A national MTO could be set based on structural fiscal balance that considers the changes in spending (e.g., aging, climate, and security) over a longer time horizon. In this context, multi-year expenditure ceilings could serve as an operational rule to ensure the medium-term anchor is achieved. EU peers provide good examples. In particular, Netherlands’ fiscal framework, built around multiannual expenditure ceilings, features the following desirable key elements: (i) a broad coverage of the expenditure ceilings, including central government, health care, and social security; (ii) independent macro-fiscal forecasts that have improved budget transparency and credibility; and (iii) a coalition agreement among political parties on the ceilings over a four-year term of the government, which has enhanced adherence to the rules. In the same vein, Sweden sets an expenditure ceiling for the central government (including pensions) in nominal terms for the current and subsequent three years. This rule is consistent with an over-the-cycle surplus target that has allowed full operation of automatic stabilizers and flexibility for discretionary actions.8
26. Institutional safeguard plays an important role in the success of fiscal frameworks. A credible fiscal framework is usually accompanied by strong institutions. The credibility and transparency of the proposed fiscal reforms would require strengthening the role of the fiscal council. In addition to the ex-post assessment of macro-fiscal projections and its consistency with the EU and national frameworks, the fiscal council could conduct medium-term macroeconomic projections, undertake debt sustainability analysis, assess fiscal risks, provide recommendations on budgetary policy and fiscal framework, and evaluate budgetary implications of the government’s proposed measures. There is also room to improve the medium-term budgeting framework and the quality of government finance statistics, namely by adopting a fully accrual accounting which would help better assess the fiscal stance.
27. The new government should expedite actions to preserve the long-term sustainability of the social security system. The pension system reserves are comfortable (32 percent of GDP), but its long-term sustainability is not guaranteed. Pension costs are expected to rise by 2 percentage points of GDP by 2040, while contributions are expected to plateau due to slower net migration flows. The existing institutional safeguards and stabilizers are not foreseen to be triggered before 2028. Staff reiterate the call for proactive action by lowering the replacement rate—the highest in Europe—and disincentivizing early retirement. Action is also needed to contain the increasing deficit of the health and maternity insurance (Assurance maladie-maternité (AMM). Options for reforms could include increasing contribution rates or a cap on contributory income and containing expenditures through caps on spending and reassessment of priorities.
Authorities’ Views
28. The authorities are more optimistic about the fiscal outlook and reiterated their commitment to fiscal prudence. The authorities indicated that the 2024 budget deficit is a transitory one and that the 2025 budget will identify medium-term savings on the expenditures side, including on public wage bill and other efficiency gains. They are also upbeat on the positive economic impulse of tax relief measures, which would limit potential revenue losses. They emphasized their strong commitment to preserve the AAA sovereign rating, as highlighted by their intention to complement the EU economic and governance framework with a more stringent national fiscal framework. Finally, they stated that they are exploring different options for potential pension reform, which will be discussed with the social partners at a later stage.
Luxembourg: Fiscal Policy
Citation: IMF Staff Country Reports 2024, 155; 10.5089/9798400277894.002.A001
C. Financial Sector Policies: Preserving Financial Sector Resilience Against Real Estate Vulnerabilities and Strengthening the Oversight Framework
Risk Assessment and Macroprudential Policy
29. Cyclical systemic risks have abated somewhat. With the contraction in GDP, credit, and house prices in 2023 and supportive fiscal measures, cyclical systemic risks have receded somewhat, as the probability of an abrupt correction in the credit and housing markets has diminished (for example, CSSF estimates house price at risk at around 10 percent over the next year, with a 10 percent probability). The credit cycle is likely to bottom out, although higher NPLs might keep credit growth subdued. At the same time, the risk profile of new mortgages has improved somewhat, recording lower loan-to-value and debt-to-income ratios. The CSSF’s requirement of a 200-basis points sensitivity analysis of credit worthiness at mortgage origination has helped reduce the share of variable rate new mortgages (from 58 percent in September 2022 to 42½ percent in February 2024). However, the debt-service-to-income ratio continued to increase, reflecting in part lower maturities.
Share of Risky Mortgages
(In percent of total new mortgages)
Citation: IMF Staff Country Reports 2024, 155; 10.5089/9798400277894.002.A001
Sources: CSSF and IMF staff calculations
30. The steep increase in interest rates exposed vulnerabilities on the banks’ stock of real estate exposures to highly indebted households and firms.
Household sector and residential real estate risks. Households’ indebtedness is high (debt to income of 180 percent and a debt service to income of 14 percent). High net wealth partially mitigates this but is dominated by illiquid assets and is unequally distributed. The FSAP analyses suggest that households’ debt servicing capacity would be constrained under the IMF’s baseline scenario, especially for lower income households and those with variable rate mortgages. Under a severe adverse scenario (higher interest and unemployment rates), despite automatic stabilizers, the share of “financially vulnerable households” and debt at risk increase to 14 and 30 percent, respectively. Credit risk would spread to more affluent households, especially since this group contracted mortgages in recent years. This could put pressure on consumption and investment decisions (Figure 11).
Corporate sector risks. Staff analysis suggests that NFCs entered the hiking cycle with stronger balance sheets, which would help them weather the impact of the current tightening in the baseline. Yet, there is significant heterogeneity across firms and sectors.5 Macro-micro simulations show that 50 percent of firms (holding 40 percent of NFCs debt) would face a liquidity gap in the adverse scenario, potentially increasing the risk of default and exposing them to higher refinancing risks and/or costs. Firms in real estate activities and to a lesser extent construction, which account for 62 percent of domestically oriented banks’ exposures to NFCs, have weak initial conditions and are exposed to larger cyclical downturns, and these are likely to face larger liquidity pressures (Figure 12).
31. Commercial real estate (CRE) risks appear manageable, but continued vigilance is required. Despite the ongoing correction in prices, the vacancy rates remain low, which augur well for the recovery when interest rates soften, and confidence recovers. That being said, the office sector in particular is still experiencing dynamic shifts in demand, given the impact of hybrid work on lease renewals and the transition to sustainable buildings. Banks have a relatively low exposure to CRE loans (6–7 percent of total bank loans), and a high coverage ratio (94 percent) and an average loan-to-value ratio (LTV) of 54 percent, allowing some room to absorb potential shocks. However, these ratios may not fully capture the latest valuation effects (especially in CRE as low transactions hinder price discovery), and the concentration of CRE loans may differ across banks and funds. CRE exposures are concentrated in real estate funds (comprising less than 5 percent of NAVs of the investment fund sector) and are mainly cross-border exposures, with only EUR3 billion oriented to the domestic market. These funds have moderate leverage (130 percent), and liquidity shortfalls are relatively limited, reducing the risks on the domestic sector. Liquidity risks are also mitigated by longer notice periods (quarterly or longer). Finally, the domestic insurance and pension sectors have low exposures to real estate. Following the ESRB recommendation on CRE vulnerabilities, in a welcome development, the authorities have stepped up data collection and monitoring of lending practices to the sector, and Luxembourg has been assessed as fully compliant. These efforts should continue and a better understanding of the OFIs intermediation role as well as inward and outward cross-border investments would be beneficial (Figure 13).
Luxembourg: Bank Solvency Stress Test Results: Breakdown by Business Model
Luxembourg: Bank Solvency Stress Test Results: Breakdown by Business Model
| Universal, Retail and Commercial Banking | Private Banking | Custodian Banking and Activities Linked to Investment Funds | Corporate Finance | Other(Covered bonds banking, clearing treasury or payment services) | |
|---|---|---|---|---|---|
| CET 1 Ratio Before Stress | 20.9% | 25.2% | 42.2% | 14.6% | 42.4% |
| CET 1 Ratio–Baseline (end of 1st year) | 22.0% | 26.7% | 43.5% | 15.2% | 47.6% |
| CET 1 Ratio–adverse (end of 1st year) | 17.0% | 16.8% | 42.6% | 13.8% | 46.5% |
| Capital Depletion in the Adverse Scenario | -3.8% | -8.5% | 0.4% | -0.9% | 4.1% |
Luxembourg: Bank Solvency Stress Test Results: Breakdown by Business Model
| Universal, Retail and Commercial Banking | Private Banking | Custodian Banking and Activities Linked to Investment Funds | Corporate Finance | Other(Covered bonds banking, clearing treasury or payment services) | |
|---|---|---|---|---|---|
| CET 1 Ratio Before Stress | 20.9% | 25.2% | 42.2% | 14.6% | 42.4% |
| CET 1 Ratio–Baseline (end of 1st year) | 22.0% | 26.7% | 43.5% | 15.2% | 47.6% |
| CET 1 Ratio–adverse (end of 1st year) | 17.0% | 16.8% | 42.6% | 13.8% | 46.5% |
| Capital Depletion in the Adverse Scenario | -3.8% | -8.5% | 0.4% | -0.9% | 4.1% |
Luxembourg: Summary of Bank Liquidity Stress Test Results
Luxembourg: Summary of Bank Liquidity Stress Test Results
| Stress Tests | Scenarios | Baseline | Deposit Run | Combined | Weak Bank/ Same-name Funds |
|---|---|---|---|---|---|
| LCR | Number of banks below threshold (<100%) | 0 | 5 | 6 | 3 |
| Share of total sample assets (%) | 0 | 21.7 | 23.8 | 17.6 | |
| NSFR | Number of banks below threshold (<100%) | 0 | / | / | / |
| Share of total sample assets | 0 | / | / | / | |
| Cash-flow Based | Number of banks with net funding gap (eop | 1 | 3 | 6 | 5 |
| CBC<0) | |||||
| Share of total sample assets (%) | 0.5 | 14.2 | 23.8 | 19.0 |
Luxembourg: Summary of Bank Liquidity Stress Test Results
| Stress Tests | Scenarios | Baseline | Deposit Run | Combined | Weak Bank/ Same-name Funds |
|---|---|---|---|---|---|
| LCR | Number of banks below threshold (<100%) | 0 | 5 | 6 | 3 |
| Share of total sample assets (%) | 0 | 21.7 | 23.8 | 17.6 | |
| NSFR | Number of banks below threshold (<100%) | 0 | / | / | / |
| Share of total sample assets | 0 | / | / | / | |
| Cash-flow Based | Number of banks with net funding gap (eop | 1 | 3 | 6 | 5 |
| CBC<0) | |||||
| Share of total sample assets (%) | 0.5 | 14.2 | 23.8 | 19.0 |
32. The financial sector is assessed to be largely resilient against severe shocks.
The FSAP shows that in the baseline scenario the banking system, overall, will benefit from high interest rates, with a small share of weak banks. In the adverse scenario, where higher interest rates accompany a severe recession, banks overall have enough capital and liquidity buffers to absorb the shocks. Although the share of weak banks in total assets would double, the recapitalization needs would remain easily manageable. All banks can sustain retail deposit outflows up to 20 percent. Only a few would need to dip into their liquidity buffers in more severe scenario, mainly those affected by potential weakness in some foreign parent banks (identified in the 2023 October GFSR).
The investment fund and insurance sectors have sufficient liquidity buffers to withstand large shocks and minimize second-round effects on international securities markets and spillbacks on the economy. The majority of the money market funds could absorb significant increases in interest rates (up to 300 basis points), while larger shocks would expose vulnerabilities in a few funds.
33. The authorities should preserve resilience against real estate vulnerabilities already built-up, preferably through sectoral systemic risk buffers. The authorities rightly kept the CCyB unchanged at 0.5 percent despite the negative credit-to-GDP gap, which de facto acts as a positive neutral CCyB. The authorities should use banks’ existing capital headroom to increase macroprudential capital requirements, preferably through targeted capital-based measures. Staff recommends a sectoral systemic risk buffer on households and corporates real estate sector exposures as it allows a more precise targeting of the source of vulnerabilities. High banks’ profitability and comfortable capital headroom reduce procyclical risks. Macroprudential policy should remain nimble. Should credit worsens significantly, the stress-test requirement of 200 basis points could be reduced and the CCyB relaxed, while avoiding loosening the LTV. Given the openness and complexity of the financial system, the authorities are strongly encouraged to evaluate the adoption of a positive neutral CCyB (PNCCyB) in the medium-term.
34. Structural households’ indebtedness should be addressed early in the recovery cycle through borrower-based measures. Income-based measures should be introduced early in the recovery cycle—with preparations on calibrations and targeting starting immediately— to counter household indebtedness. The FSAP analysis suggests introducing a stressed-DSTI around 45–50 percent, possibly tied to the current interest rate stress test required by CSSF for mortgages. The authorities should also consider gradually reducing the maximum loan-to-value for first-time homebuyers. A heterogeneous agent model calibrated for Luxembourg shows that the introduction of income-based limits in a context of supply rigidity could reduce house prices and households’ indebtedness in the medium term (Figure 14). This effect outweighs the financial constraint for middle income households, suggesting that this might help mitigate the middle-income squeeze. The affordability cost for low-income households could be compensated through social housing measures and, more generally, housing supply-side considerations (see subsection D).
Calibrating Debt-Service-to-Income Limit
(Changes in Probability of Default (PD) of households in different quintiles (Q) between different DSTI thresholds)
Citation: IMF Staff Country Reports 2024, 155; 10.5089/9798400277894.002.A001
Sources: IMF staff estimates based on HFCS wave IV.Notes: The results are based on a horse race, estimating the cumulative probability of default below and above different DSTI thresholds in the stress scenario (X-axis). The “optimal” thresholds correspond to the higher PD multiples. The “optimal” level for all households is 45 percent, while by income level, most peaks are around 50 percent.
35. Efforts are also needed to address potential inaction bias and enhance the effectiveness of macroprudential policy. Although some actions have been taken in response to mounting households and real estate vulnerabilities, these measures focused more on strengthening resilience, tended to come somewhat late in the cycle, and were only partially effective in addressing rising households’ indebtedness. With housing affordability high on the political agenda, there is a risk of inaction bias. To mitigate this risk, the 2024 FSAP recommends upholding the primacy of the financial stability objective of the macroprudential decision-making authorities by: (i) reducing the role of the Ministry of Finance in macroprudential policy decisions deliberated in the CdRS; and (ii) strengthening accountability and transparency by systematically communicating on macroprudential policy decisions and underlying factors, even in cases where no action is taken, while enhancing accessibility to the general public. Finally, greater coordination between financial stability and fiscal and housing policies could enhance effectiveness, while minimizing potential costs of macroprudential measures.
Supervisory, Regulatory and Oversight Frameworks
36. The authorities have made commendable progress in implementing recommendations from the 2017 FSAP (Appendix I, FSSA). Resources have increased in the supervisory agencies. The authorities have appreciably increased data collection, reporting, and analysis of systemic risks monitoring, especially on real estate and investment funds. Significant steps have been taken in aligning regulatory frameworks with international standards and reinforcing on-site inspections for banks and investment funds. The authorities have engaged in more active international collaboration especially during stress episodes (e.g., liability-driven investment crisis) and have been contributing actively to international fora, including on investment funds regulation.
37. The well-supervised financial sector could further benefit from targeted regulatory and supervisory improvements. The 2024 FSAP did not find evidence of lack of operational independence of the supervisory authorities in practice. Nevertheless, the authorities should consider legal amendments to protect procedural safeguards to future-proof independence of Commission de Surveillance du Secteur Financier (CSSF) and Commissariat aux Assurances (CAA) from potential government influence. Large cross-border connections require further enhanced inter-agency cooperation, particularly on: (i) information sharing for bank group entities; (ii) risk-based onsite supervision of investment funds’ foreign delegates; and (iii) monitoring cross-border flows for money laundering/financing of terrorism risks. To formalize the division of responsibilities between CSSF and Banque centrale du Luxembourg (BCL) on liquidity supervision of Less Significant Institutions, the draft Memorandum of Understanding should be finalized. CSSF supervisory risk assessment should incorporate group links between depositaries and investment fund managers as risk factors into the risk-based approach and enhance monitoring of linkages with other financial institutions. The enforcement powers of CSSF in investment funds should be increased with higher fines and harmonization between types of funds, to reduce the risk of regulatory arbitrage. Separately, the authorities should continue to strengthen the financial safety net framework.
38. As the authorities continuously advance the understanding of ML/TF risks, additional measures should be considered to manage ML/TF risks related to cross-border flows. Monitoring and analysis of cross-border payments data, combined with macro-economic data could highlight unusual payment patterns, warranting further scrutiny by supervisors. This analysis would benefit from information exchanges with the key financial institutions and with foreign and domestic authorities. The authorities should continue to ensure the sufficiency of resources available to AML/CFT supervision.
Authorities’ Views
39. National authorities generally appreciated the FSAP conclusions but had more nuanced views on the need for immediate action in some areas. They agreed that the main risks currently arise from real estate exposures. However, the authorities cited several additional mitigating factors (including high households’ wealth, high coverage ratios, and high capital buffers) and foresee lower risk for consumption than the IMF. Current macroprudential policies composed of capital and borrower-based measures are seen as appropriate to the present challenges and sufficient to mitigate the pockets of vulnerabilities identified. They consider that the activation of additional macroprudential instruments might further depress demand and lead to potentially procyclical and unintended effects. They regularly assess the appropriateness of the current macroprudential measures. On the institutional side, the Ministry of Finance considers the current governance arrangements of the CdRS to be appropriate.
40. The authorities broadly agreed with the recommendations to continue improving supervision. The authorities considered the institutional framework for supervision to be appropriate and in line with European and international standards.
D. Real Estate Sector and Housing Policies: Preserving Supply Capacities
41. Real estate activity has dropped significantly, raising concerns about more durable supply disruptions. The decline in real estate activity has been accompanied by a sharp drop in building permits. Bankruptcies in the sector have increased, especially among some structurally weak firms, and layoffs doubled, raising concerns of more permanent disruptions to downstream activities, with potentially larger imbalances between supply and demand going forward. Another concern is that this could increase an already high concentration of real estate developers.
42. The authorities’ response should allow an orderly rebalancing of the housing market, while expediting supply-side measures to enhance structurally affordability. Measures to support housing demand, especially untargeted tax incentives and buy-to-let, could help alleviate pressure on the construction sector. However, these benefits are likely to be short-lived and would lead to a suboptimal equilibrium where affluent households will benefit disproportionately, especially in the context of long-standing housing affordability concerns, and house prices will continue to grow faster than income levels, with potential unintended effects on households’ indebtedness. Over time, they risk feeding moral hazard and promoting risk-taking behavior by borrowers and lenders. Instead, in line with the 2023 Article IV, staff propose to frontload public projects using public land, with greater involvement of the private sector and expedite supply-side measures that could reduce costs and delays for real estate developers (e.g., densification, red tape). The authorities’ decision to extend the coverage of the short-term work scheme to construction firms and facilitate reallocation of workers within the sector will mitigate supply disruptions and are welcome. Additional assistance to viable real estate developers under strict conditions and support in the completion of unfinished projects (e.g., in the form of guarantees under strict underwriting standards) could also be considered. Once the cycle turns, the authorities are encouraged to better target their help-to-buy policies, phasing out gradually the interest payment deductibility, while reducing rent controls. They should also expedite the passage of the law on land taxation to reduce land hoarding.
Authorities’ Views
43. The authorities acknowledged the difficult trade-offs and agreed on the need to expedite supply measures. They emphasized the risks associated with the sizable downturn in the sector and the need to smooth the cycle through temporary measures. They consider that the government support is key to restoring the confidence in the sector and avoiding durable disruptions to supply. Regarding costs, the authorities indicated that the authorities prefer financing growth than financing unemployment. They reiterated their commitment to enhance supply. In this context, a national roundtable table on housing involving different stakeholders was organized to identify supply bottlenecks and potential corrective measures.
E. Structural Policies: Boosting Labor Supply, Competitiveness and Productivity
44. The broad slowdown in productivity growth in Luxembourg since the Global Financial Crisis (GFC) warrants sustained policy efforts to enhance productivity. Despite higher levels of productivity, productivity growth on average (0.3 percent) has been much slower in Luxembourg than its neighbors (0.9 percent) between 1995–23. Decomposition of labor productivity growth reveals that most of the changes in productivity have been driven by within-sector productivity developments. The slower growth can in part be attributed to the increasing productivity differential observed between frontier (80th percentile) and laggard firms (20th percentile). In non-financial services, frontier firms were about five times more productive than laggards in 2009, after which this ratio has been steadily increasing.9 This is further exacerbated by the negative contribution of total factor productivity to labor productivity.
45. Policies that catalyze technology innovation and increase R&D spending can help rekindle productivity growth. With an aging population and fewer average hours worked per person, growth without productivity gains has its limits. To boost productivity growth, policies should focus on two fronts. First, increasing overall productivity, i.e., moving out the productivity frontier by increased investments in intangible assets. Investment in intangible assets (R&D, computer software, and other intellectual property products) has been stagnant at about one percent of GDP for the past two decades. Use of generative artificial intelligence (AI) has the potential to unlock substantial productivity gains. Access to these technologies and re-skilling (and up-skilling) of individuals to realize these gains may require investment in relevant skills and infrastructure. Second, reduce the productivity dispersion between frontier and laggard firms by ensuring innovation diffusion within sectors and reducing skill mismatches. Reduced administrative burden and the recently implemented laws that facilitate entry and exit of companies from the market should help improve allocative efficiency and enhance competition.
Contributions to Annual GDP Growth
(Percentage points)
Citation: IMF Staff Country Reports 2024, 155; 10.5089/9798400277894.002.A001
Source: GECD Compendium of Productivity Indicators.
46. Increasing the flexibility of the wage indexation system would not only boost competitiveness but also enhance labor mobility. There has been a decoupling of real wages and productivity growth in Luxembourg since the GFC. On average, between 2011–22, unit labor costs increased by 3.5 percent, while labor productivity declined by 0.2 percent, with notable differences across sectors (Annex III). The rise in unit labor costs becomes even more stark in comparison to neighboring countries which have also seen growing costs but at a much slower rate. Within Luxembourg, the share of compensation of employees in gross value added has been increasing since 2015. The growing labor costs, a result of a tight labor market and automatic wage indexation, could impact investment levels and capital accumulation in the long run. This could further worsen the productivity dispersion between frontier and laggard firms hindering their ability to invest in intangible assets.
Luxembourg: Rising Unit Labor Costs
Citation: IMF Staff Country Reports 2024, 155; 10.5089/9798400277894.002.A001
47. Building on its well-developed ecosystem, Luxembourg should further harness the benefits of sustainable finance and fintech while managing associated risks. Luxembourg has been among the first movers in developing the infrastructure for sustainable finance. This has allowed the country to be one of the world’s environmental, social and governance growth (ESG) finance hubs (Box 1). However, competition has been growing in recent years. Preserving the country’s comparative advantage would require accelerating efforts to attract talents. This could be achieved by creating an ESG finance curriculum, better harnessing the synergies between fintech, artificial intelligence (AI), and sustainable finance (e.g., by applying digital technology solutions to ESG data and risk management challenges), and mutualizing compliance costs.
Cementing Luxembourg’s Leadership Position in Sustainable Finance
Luxembourg is a world pioneer in sustainable finance. The Luxembourg green exchange was established in 2016 as the first platform on exchange of green securities. Issuance of green bonds has increased exponentially in 2023 (upper right chart), and capitalization topped the EUR 1 trillion mark in February 2024. The community of issuers include mainly supranational institutions such as the European Union, multilateral development banks, financial institutions, and corporates across a range of different sectors. More than 18 percent of non-resident participants issued foreign bonds categorized as green bonds in Luxembourg, ranking the country second in the world (upper left chart). Luxembourg has been also the first European country to issue a sovereign sustainability bond in 2020.
Luxembourg’s investment fund industry is also well positioned to harness the benefits from sustainable finance. Luxembourg is domicile to 34 percent of the assets under management of article 8 funds and 51 percent of article 9 funds (bottom left chart). Net inflows into these funds have been negative since mid-2022 due to reclassifications. Yet, the harmonization of labels and taxonomies and filling of data gaps at the European and international level is expected to increase investors’ trust in the coming years. Luxembourg domiciled funds on average charge 0.21 percent for Article 9 investment funds, ranking them among the most competitive in Europe (bottom right chart). This, together with the well-developed ecosystem and business/investor-friendly tax system augur well for the future of sustainable finance in Luxembourg.
Authorities’ Views
48. The authorities acknowledged that there has been a discernible slowdown in productivity growth since the GFC. Luxembourg’s national productivity board (Conseil national de la productivité) identified the need for differentiated policies to boost productivity to cater to the specific needs of the sector. They emphasized that research and development, innovation, reskilling of the workforce, and relaxation of the regulatory framework are key priority areas. The authorities offer free training programs (focusing of specific sectors), including language training to reduce skill mismatches. There is also a research program in STATEC, which focuses on understanding the determinants of productivity to aid evidence-based policy making.
Staff Appraisal
49. The outlook is for a gradual recovery, although uncertainty remains high and risks predominantly to the downside. Following negative GDP growth last year, buoyant consumption and a gradual recovery of residential investment are expected to lift growth in 2024 and strength it in 2025. Yet, the output gap will remain negative. Inflation is expected to recede further in 2024 but remain somewhat above the ECB’s target until 2026. The outlook is highly uncertain and risks to growth remain to the downside, given heightened geopolitical tensions and risks in the domestic real estate sector.
50. Fiscal policy should balance reinvigorating growth and helping disinflation in a cost-efficient manner. The moderately expansionary fiscal stance in 2024 is broadly appropriate. Yet the composition of the stimulus could have been more efficient. Given the robust consumption growth and historically high saving rate, more targeted and temporary measures would have been more appropriate, and a contractionary stance should be considered in 2025. That said, fiscal policy should remain agile, slowing the adjustment if growth surprises to the downside and accelerating it, while providing targeted and temporary support, if inflation becomes more entrenched.
51. Despite ample fiscal space, the authorities should adopt a more prudent fiscal policy to stabilize the debt in the medium term. Spending pressures and uncertainty around fiscal revenues are elevated and could lead to a rapid increase of public debt, albeit from low levels. Hence, a gradual fiscal consolidation would stabilize the debt in the medium term and provide further room for the government’s key priorities and reforms, including the digital and green transition, and better prepare the country for the expected increase in ageing costs. Improving spending efficiency, including by better targeting social benefits, containing the wage bill, and expediting the pension reform are highly encouraged. Also, carefully calibrating tax reforms is needed to avoid revenue losses, while boosting labor supply, investment, and productivity.
52. The authorities’ intention to complement the EU’s Economic Governance Framework with a national fiscal framework is welcome. To help better anchor fiscal policy, the authorities intend to complement the EU rules with a medium-term objective (MTO), which could be helpful improving the predictability of fiscal policy while taking into account longer term pressure, including ageing costs. The MTO could be strengthened by an operational rule based on net primary expenditure ceilings and an enhanced role for the national fiscal council. This would also require stronger multi-year budgeting framework, including better assessment of fiscal risks, and improvement of fiscal statistics.
53. Macroprudential policy settings should aim at preserving resilience in the short term and tackling elevated structural households’ indebtedness early in the recovery cycle. While the banking system is strong and should be able to weather severe shocks, real estate exposures are concentrated in domestically oriented banks. Introducing a systemic risk buffer on real estate exposures could help preserve resilience with minimal procyclical impact. Continued close monitoring of real estate risks, ensuring adequate provisioning, and sound lending practices are paramount. The authorities should also stand ready to activate income-based measures, such as debt-service to income once the cycle turns. They should also consider gradually reducing the maximum LTV limit of 100 percent. If credit supply tightens significantly, the stress test requirement of 200 basis points could be reduced, and CCyB relaxed while keeping the LTV limits unchanged. The institutional setting could be further enhanced to improve the effectiveness of macroprudential policy and reduce the risk of inaction bias. This could be achieved by reducing the role of the government in macroprudential policy decisions, strengthening communication, including in case of inaction, and strengthening coordination with other policies.
54. Maintaining the momentum in implementing FSAP recommendations could further bolster financial sector’s resilience. The operational independence of the supervisory authorities should be future-proofed, and inter-agency cooperation on supervision of global banking groups should be further enhanced. It is critical to have adequate supervisory processes to ensure that those banking groups with funding gaps in the FSAP stress tests have effective liquidity risk management in place, including contingency funding plans at group level when subsidiaries in Luxembourg have not set up separate standing facilities with the BCL. Monitoring the linkages of investment funds with other financial institutions and the CSSF’s enforcement framework should be enhanced. Also, the authorities are advised to fill in remaining gaps in the crisis management and deposit insurance framework.
55. The authorities’ real estate measures should be redesigned to allow prices to adjust, while speeding up much needed reforms to reduce structural imbalances. In the short term, temporary support measures should be designed in a way that allows prices to adjust to restore affordability. This could be achieved through higher public investment in affordable and social housing using public lands and in partnership with private builders as well as higher densification and reduction of administrative/regulatory burden. Continuing short-term work scheme in the construction sector and targeted support to viable firms, will help preserve supply capacities. In the longer term, better targeting help-to-buy policies—especially phasing out interest deductibility— and policies to unlock housing supply, including through land tax reform are needed to reduce structural imbalances.
56. Sustained economic growth hinges on boosting productivity and competitiveness. Increasing investment in intangible assets, aligning workers’ skills with current and most importantly future demand of the economy, and preparedness to harness the potential productivity gains from generative AI will be key to ensuring productivity gains. In the short term, the authorities should hasten the reduction of regulatory and administrative burdens and enhance wage flexibility.
57. Staff recommend that the next Article IV consultation take place on the standard 12-month cycle.
Luxembourg: Households Stress Test Results
Citation: IMF Staff Country Reports 2024, 155; 10.5089/9798400277894.002.A001
Luxembourg: Corporate Stress Test Results
Citation: IMF Staff Country Reports 2024, 155; 10.5089/9798400277894.002.A001
Sources: Central balance sheet office (STATEC); and IMF staff estimates
Luxembourg: CRE Vulnerabilities
Citation: IMF Staff Country Reports 2024, 155; 10.5089/9798400277894.002.A001
Notes: Liquidity surplus/deficit is calculated as the difference between the portfolio liquidity and the investor liquidity both reported in percent of the NAV which is then cumulated over liquidity buckets. Liquidity shortage is defined as the sum of the negative liquidity surpluses (i.e., deficits) at the level of each fund, without considering any (positive) liquidity surplus.
Luxembourg: Impact of the Introduction of Income-Based Limits: Evidence from a Continuous Heterogenous Agent Model
Citation: IMF Staff Country Reports 2024, 155; 10.5089/9798400277894.002.A001
Sources: Fornino and Jardak (Forthcoming).Notes: The upper chart compares the long-term outcomes (steady states) relative to the baseline in the following cases: the LTV varies continuously from 70 percent to 95 percent (blue line) and a DTI is introduced along with the LTV tightening (orange line). The bottom chart compares the share of homeowners by income level in the baseline, where the LTV limit is set at current level (blue line) and when it is combined with a DTI (orange line).
Luxembourg: Selected Economic Indicators, 2019–29
Contribution to GDP growth.
Overall economy.
Including a reclassification of investment companies from financial to non-financial institutions in 2015.
Luxembourg: Selected Economic Indicators, 2019–29
| Projections | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | ||||
| Real Economy (percent change) | ||||||||||||||
| Gross domestic product | 2.9 | -0.9 | 7.2 | 1.4 | -1.1 | 1.3 | 2.9 | 2.5 | 2.3 | 2.3 | 2.3 | |||
| Total domestic demand | 4.9 | -4.0 | 10.9 | -1.0 | 2.4 | 1.9 | 3.3 | 2.7 | 2.6 | 2.5 | 2.5 | |||
| Private consumption | 2.5 | -8.5 | 11.3 | 2.3 | 4.0 | 2.6 | 3.8 | 2.9 | 2.6 | 2.6 | 2.5 | |||
| Public consumption | 2.8 | 7.3 | 5.1 | 2.6 | 2.5 | 2.8 | 2.3 | 2.5 | 2.5 | 2.5 | 2.5 | |||
| Gross investment | 11.6 | -6.4 | 16.4 | -9.8 | -0.8 | -0.3 | 3.5 | 2.5 | 2.5 | 2.5 | 2.5 | |||
| Foreign balance 1/ | -0.3 | 1.8 | 0.0 | 2.0 | -2.6 | -0.2 | 0.6 | 0.7 | 0.6 | 0.6 | 0.6 | |||
| Exports of goods and nonfactor services | 6.0 | 0.6 | 10.3 | -0.6 | -1.4 | 1.2 | 2.5 | 2.5 | 2.4 | 2.4 | 2.4 | |||
| Imports of goods and nonfactor services | 7.4 | -0.4 | 12.4 | -1.9 | -0.1 | 1.5 | 2.6 | 2.5 | 2.5 | 2.5 | 2.5 | |||
| Labor Market (thousands, unless indicated) | ||||||||||||||
| Resident labor force | 286.8 | 294.0 | 298.0 | 302.3 | 309.2 | 314.7 | 320.7 | 327.0 | 333.3 | 339.8 | 346.5 | |||
| Unemployed (average) | 15.4 | 18.7 | 17.1 | 14.6 | 16.2 | 18.6 | 18.9 | 18.6 | 18.3 | 18.3 | 18.4 | |||
| (Percent of total labor force) | 5.4 | 6.4 | 5.7 | 4.8 | 5.2 | 5.9 | 5.9 | 5.7 | 5.5 | 5.4 | 5.3 | |||
| Resident employment | 271.4 | 275.3 | 280.8 | 287.8 | 293.0 | 296.1 | 301.8 | 308.3 | 315.1 | 321.6 | 328.1 | |||
| (Percent change) | 2.6 | 1.4 | 2.0 | 2.5 | 1.8 | 1.1 | 1.9 | 2.2 | 2.2 | 2.1 | 2.0 | |||
| Cross-border workers (net) | 191.9 | 196.2 | 204.3 | 213.7 | 219.7 | 223.4 | 227.9 | 233.0 | 238.3 | 243.8 | 249.4 | |||
| Total employment | 463.3 | 471.6 | 485.1 | 501.4 | 512.7 | 519.5 | 529.6 | 541.3 | 553.4 | 565.4 | 577.5 | |||
| (Percent change) | 3.5 | 1.8 | 2.9 | 3.4 | 2.2 | 1.3 | 2.0 | 2.2 | 2.2 | 2.2 | 2.1 | |||
| Prices and costs (percent change) | ||||||||||||||
| GDP deflator | 0.9 | 4.3 | 4.6 | 5.7 | 3.4 | 2.4 | 3.0 | 1.9 | 2.0 | 2.0 | 2.0 | |||
| CPI (harmonized), p.a. | 1.7 | 0.0 | 3.5 | 8.2 | 2.9 | 2.6 | 3.1 | 2.1 | 2.0 | 2.0 | 2.1 | |||
| CPI core (harmonized), p.a. | 1.8 | 1.2 | 1.5 | 4.2 | 3.9 | 2.8 | 2.9 | 2.2 | 1.9 | 2.0 | 2.0 | |||
| CPI (national definition), p.a. | 1.7 | 0.8 | 2.5 | 6.3 | 3.7 | 2.7 | 3.2 | 1.8 | 2.1 | 2.0 | 2.0 | |||
| Wage growth 2/ | 1.9 | 1.2 | 5.1 | 5.9 | 7.3 | 3.5 | 2.9 | 2.3 | 2.3 | 2.3 | 2.3 | |||
| Nominal unit labor costs 2/ | 2.5 | 3.9 | 0.9 | 8.0 | 10.9 | 3.6 | 1.9 | 2.0 | 2.2 | 2.2 | 2.1 | |||
| Public finances (percent of GDP) | ||||||||||||||
| General government revenues | 45.3 | 43.5 | 43.4 | 43.5 | 46.8 | 47.0 | 47.9 | 48.0 | 48.2 | 48.4 | 48.7 | |||
| General government expenditures | 43.1 | 47.0 | 42.8 | 43.9 | 48.1 | 49.2 | 49.4 | 49.2 | 49.5 | 49.9 | 50.2 | |||
| General government balance | 2.2 | -3.4 | 0.5 | -0.4 | -1.3 | -2.2 | -1.5 | -1.3 | -1.3 | -1.5 | -1.6 | |||
| General government cyclically-adjusted balance | 0.6 | -2.0 | 0.0 | -0.5 | -1.4 | -1.7 | -1.4 | -1.3 | -1.4 | -1.5 | -1.6 | |||
| General government structural balance | 0.6 | 1.8 | 1.1 | 0.3 | 0.2 | -0.9 | -1.4 | -1.3 | -1.4 | -1.5 | -1.6 | |||
| General government gross debt | 22.4 | 24.6 | 24.5 | 24.7 | 25.7 | 28.1 | 28.8 | 29.5 | 30.1 | 30.8 | 31.4 | |||
| Balance of Payments (percent of GDP) | ||||||||||||||
| Current account | 8.9 | 8.6 | 7.9 | 7.6 | 6.8 | 7.0 | 7.3 | 7.3 | 7.2 | 7.3 | 7.2 | |||
| Balance on goods | 2.6 | 2.3 | 1.2 | 0.1 | -0.2 | -0.8 | -0.8 | -0.9 | -0.9 | -1.0 | -1.0 | |||
| Balance on services | 33.7 | 37.0 | 37.3 | 37.2 | 34.4 | 33.9 | 33.5 | 33.5 | 33.4 | 33.2 | 33.1 | |||
| Net factor income | -27.7 | -30.7 | -30.2 | -29.1 | -26.9 | -26.3 | -25.6 | -25.6 | -25.4 | -25.2 | -25.0 | |||
| Balance on current transfers | 0.3 | 0.0 | -0.4 | -0.6 | -0.5 | 0.2 | 0.2 | 0.2 | 0.2 | 0.2 | 0.2 | |||
| Exchange rates, period averages | ||||||||||||||
| U.S. dollar per euro | 1.12 | 1.14 | 1.18 | 1.05 | 1.08 | … | … | … | … | … | … | |||
| (Percent change) | -5.2 | 1.9 | 3.7 | -11.0 | 2.6 | … | … | … | … | … | … | |||
| Nominal effective rate (2010=100) | 101.7 | 103.4 | 104.0 | 102.7 | 105.3 | … | … | … | … | … | … | |||
| (Percent change) | -0.6 | 1.7 | 0.6 | -1.3 | 2.5 | … | … | … | … | … | … | |||
| Real effective rate (CPI based; 2010=100) | 99.6 | 101.0 | 101.2 | 98.2 | 98.3 | … | … | … | … | … | … | |||
| (Percent change) | -0.7 | 1.4 | 0.2 | -3.0 | 0.1 | … | … | … | … | … | … | |||
| Credit growth and interest rates | ||||||||||||||
| Nonfinancial private sector credit (eop, percent change) 3/ | 7.2 | 5.0 | 5.3 | 4.4 | -3.0 | 2.2 | 6.3 | 4.8 | 4.8 | 4.7 | 4.6 | |||
| 10-year government bond yield, annual average (percent) | -0.1 | -0.4 | -0.4 | 1.5 | 3.1 | … | … | … | … | … | … | |||
| Memorandum items: Land area = 2,586 sq. km; population in 2019 = 626,108; GDP per head = €101,446 | ||||||||||||||
| GDP (billions of euro) | 62.4 | 64.5 | 72.4 | 77.5 | 79.3 | 82.2 | 87.1 | 91.0 | 95.0 | 99.1 | 103.4 | |||
| Output gap (percent deviation from potential) | 0.7 | -1.7 | 2.9 | 2.1 | -1.0 | -1.7 | -0.8 | -0.3 | 0.0 | 0.0 | 0.0 | |||
| Potential output growth | 2.1 | 1.6 | 2.4 | 2.2 | 2.0 | 2.0 | 2.0 | 2.0 | 2.0 | 2.3 | 2.3 | |||
Contribution to GDP growth.
Overall economy.
Including a reclassification of investment companies from financial to non-financial institutions in 2015.
Luxembourg: Selected Economic Indicators, 2019–29
| Projections | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | ||||
| Real Economy (percent change) | ||||||||||||||
| Gross domestic product | 2.9 | -0.9 | 7.2 | 1.4 | -1.1 | 1.3 | 2.9 | 2.5 | 2.3 | 2.3 | 2.3 | |||
| Total domestic demand | 4.9 | -4.0 | 10.9 | -1.0 | 2.4 | 1.9 | 3.3 | 2.7 | 2.6 | 2.5 | 2.5 | |||
| Private consumption | 2.5 | -8.5 | 11.3 | 2.3 | 4.0 | 2.6 | 3.8 | 2.9 | 2.6 | 2.6 | 2.5 | |||
| Public consumption | 2.8 | 7.3 | 5.1 | 2.6 | 2.5 | 2.8 | 2.3 | 2.5 | 2.5 | 2.5 | 2.5 | |||
| Gross investment | 11.6 | -6.4 | 16.4 | -9.8 | -0.8 | -0.3 | 3.5 | 2.5 | 2.5 | 2.5 | 2.5 | |||
| Foreign balance 1/ | -0.3 | 1.8 | 0.0 | 2.0 | -2.6 | -0.2 | 0.6 | 0.7 | 0.6 | 0.6 | 0.6 | |||
| Exports of goods and nonfactor services | 6.0 | 0.6 | 10.3 | -0.6 | -1.4 | 1.2 | 2.5 | 2.5 | 2.4 | 2.4 | 2.4 | |||
| Imports of goods and nonfactor services | 7.4 | -0.4 | 12.4 | -1.9 | -0.1 | 1.5 | 2.6 | 2.5 | 2.5 | 2.5 | 2.5 | |||
| Labor Market (thousands, unless indicated) | ||||||||||||||
| Resident labor force | 286.8 | 294.0 | 298.0 | 302.3 | 309.2 | 314.7 | 320.7 | 327.0 | 333.3 | 339.8 | 346.5 | |||
| Unemployed (average) | 15.4 | 18.7 | 17.1 | 14.6 | 16.2 | 18.6 | 18.9 | 18.6 | 18.3 | 18.3 | 18.4 | |||
| (Percent of total labor force) | 5.4 | 6.4 | 5.7 | 4.8 | 5.2 | 5.9 | 5.9 | 5.7 | 5.5 | 5.4 | 5.3 | |||
| Resident employment | 271.4 | 275.3 | 280.8 | 287.8 | 293.0 | 296.1 | 301.8 | 308.3 | 315.1 | 321.6 | 328.1 | |||
| (Percent change) | 2.6 | 1.4 | 2.0 | 2.5 | 1.8 | 1.1 | 1.9 | 2.2 | 2.2 | 2.1 | 2.0 | |||
| Cross-border workers (net) | 191.9 | 196.2 | 204.3 | 213.7 | 219.7 | 223.4 | 227.9 | 233.0 | 238.3 | 243.8 | 249.4 | |||
| Total employment | 463.3 | 471.6 | 485.1 | 501.4 | 512.7 | 519.5 | 529.6 | 541.3 | 553.4 | 565.4 | 577.5 | |||
| (Percent change) | 3.5 | 1.8 | 2.9 | 3.4 | 2.2 | 1.3 | 2.0 | 2.2 | 2.2 | 2.2 | 2.1 | |||
| Prices and costs (percent change) | ||||||||||||||
| GDP deflator | 0.9 | 4.3 | 4.6 | 5.7 | 3.4 | 2.4 | 3.0 | 1.9 | 2.0 | 2.0 | 2.0 | |||
| CPI (harmonized), p.a. | 1.7 | 0.0 | 3.5 | 8.2 | 2.9 | 2.6 | 3.1 | 2.1 | 2.0 | 2.0 | 2.1 | |||
| CPI core (harmonized), p.a. | 1.8 | 1.2 | 1.5 | 4.2 | 3.9 | 2.8 | 2.9 | 2.2 | 1.9 | 2.0 | 2.0 | |||
| CPI (national definition), p.a. | 1.7 | 0.8 | 2.5 | 6.3 | 3.7 | 2.7 | 3.2 | 1.8 | 2.1 | 2.0 | 2.0 | |||
| Wage growth 2/ | 1.9 | 1.2 | 5.1 | 5.9 | 7.3 | 3.5 | 2.9 | 2.3 | 2.3 | 2.3 | 2.3 | |||
| Nominal unit labor costs 2/ | 2.5 | 3.9 | 0.9 | 8.0 | 10.9 | 3.6 | 1.9 | 2.0 | 2.2 | 2.2 | 2.1 | |||
| Public finances (percent of GDP) | ||||||||||||||
| General government revenues | 45.3 | 43.5 | 43.4 | 43.5 | 46.8 | 47.0 | 47.9 | 48.0 | 48.2 | 48.4 | 48.7 | |||
| General government expenditures | 43.1 | 47.0 | 42.8 | 43.9 | 48.1 | 49.2 | 49.4 | 49.2 | 49.5 | 49.9 | 50.2 | |||
| General government balance | 2.2 | -3.4 | 0.5 | -0.4 | -1.3 | -2.2 | -1.5 | -1.3 | -1.3 | -1.5 | -1.6 | |||
| General government cyclically-adjusted balance | 0.6 | -2.0 | 0.0 | -0.5 | -1.4 | -1.7 | -1.4 | -1.3 | -1.4 | -1.5 | -1.6 | |||
| General government structural balance | 0.6 | 1.8 | 1.1 | 0.3 | 0.2 | -0.9 | -1.4 | -1.3 | -1.4 | -1.5 | -1.6 | |||
| General government gross debt | 22.4 | 24.6 | 24.5 | 24.7 | 25.7 | 28.1 | 28.8 | 29.5 | 30.1 | 30.8 | 31.4 | |||
| Balance of Payments (percent of GDP) | ||||||||||||||
| Current account | 8.9 | 8.6 | 7.9 | 7.6 | 6.8 | 7.0 | 7.3 | 7.3 | 7.2 | 7.3 | 7.2 | |||
| Balance on goods | 2.6 | 2.3 | 1.2 | 0.1 | -0.2 | -0.8 | -0.8 | -0.9 | -0.9 | -1.0 | -1.0 | |||
| Balance on services | 33.7 | 37.0 | 37.3 | 37.2 | 34.4 | 33.9 | 33.5 | 33.5 | 33.4 | 33.2 | 33.1 | |||
| Net factor income | -27.7 | -30.7 | -30.2 | -29.1 | -26.9 | -26.3 | -25.6 | -25.6 | -25.4 | -25.2 | -25.0 | |||
| Balance on current transfers | 0.3 | 0.0 | -0.4 | -0.6 | -0.5 | 0.2 | 0.2 | 0.2 | 0.2 | 0.2 | 0.2 | |||
| Exchange rates, period averages | ||||||||||||||
| U.S. dollar per euro | 1.12 | 1.14 | 1.18 | 1.05 | 1.08 | … | … | … | … | … | … | |||
| (Percent change) | -5.2 | 1.9 | 3.7 | -11.0 | 2.6 | … | … | … | … | … | … | |||
| Nominal effective rate (2010=100) | 101.7 | 103.4 | 104.0 | 102.7 | 105.3 | … | … | … | … | … | … | |||
| (Percent change) | -0.6 | 1.7 | 0.6 | -1.3 | 2.5 | … | … | … | … | … | … | |||
| Real effective rate (CPI based; 2010=100) | 99.6 | 101.0 | 101.2 | 98.2 | 98.3 | … | … | … | … | … | … | |||
| (Percent change) | -0.7 | 1.4 | 0.2 | -3.0 | 0.1 | … | … | … | … | … | … | |||
| Credit growth and interest rates | ||||||||||||||
| Nonfinancial private sector credit (eop, percent change) 3/ | 7.2 | 5.0 | 5.3 | 4.4 | -3.0 | 2.2 | 6.3 | 4.8 | 4.8 | 4.7 | 4.6 | |||
| 10-year government bond yield, annual average (percent) | -0.1 | -0.4 | -0.4 | 1.5 | 3.1 | … | … | … | … | … | … | |||
| Memorandum items: Land area = 2,586 sq. km; population in 2019 = 626,108; GDP per head = €101,446 | ||||||||||||||
| GDP (billions of euro) | 62.4 | 64.5 | 72.4 | 77.5 | 79.3 | 82.2 | 87.1 | 91.0 | 95.0 | 99.1 | 103.4 | |||
| Output gap (percent deviation from potential) | 0.7 | -1.7 | 2.9 | 2.1 | -1.0 | -1.7 | -0.8 | -0.3 | 0.0 | 0.0 | 0.0 | |||
| Potential output growth | 2.1 | 1.6 | 2.4 | 2.2 | 2.0 | 2.0 | 2.0 | 2.0 | 2.0 | 2.3 | 2.3 | |||
Contribution to GDP growth.
Overall economy.
Including a reclassification of investment companies from financial to non-financial institutions in 2015.
Luxembourg: Balance of Payments, 2019–291
(Percent of GDP)
Includes merchanting trade operations.
Luxembourg: Balance of Payments, 2019–291
(Percent of GDP)
| Projections | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | |||
| Current account | 8.9 | 8.6 | 7.9 | 7.6 | 6.8 | 7.0 | 7.3 | 7.3 | 7.2 | 7.3 | 7.2 | ||
| Balance on goods and services | 36.2 | 39.3 | 38.5 | 37.4 | 34.2 | 33.1 | 32.7 | 32.6 | 32.4 | 32.3 | 32.1 | ||
| Trade balance 1/ | 2.6 | 2.3 | 1.2 | 0.1 | -0.2 | -0.8 | -0.8 | -0.9 | -0.9 | -1.0 | -1.0 | ||
| Goods exports | 38.7 | 33.3 | 33.9 | 33.8 | 32.0 | 31.5 | 31.9 | 32.7 | 33.6 | 34.5 | 35.4 | ||
| Goods imports | 36.1 | 31.0 | 32.7 | 33.6 | 32.3 | 32.3 | 32.7 | 33.6 | 34.5 | 35.5 | 36.5 | ||
| Balance on services | 33.7 | 37.0 | 37.3 | 37.2 | 34.4 | 33.9 | 33.5 | 33.5 | 33.4 | 33.2 | 33.1 | ||
| Services exports | 166.9 | 170.7 | 182.4 | 177.3 | 173.4 | 176.8 | 175.5 | 175.9 | 175.9 | 176.0 | 176.2 | ||
| Services imports | 133.2 | 133.7 | 145.1 | 140.1 | 138.9 | 142.9 | 142.0 | 142.4 | 142.6 | 142.8 | 143.0 | ||
| Net factor income | -27.7 | -30.7 | -30.2 | -29.1 | -26.9 | -26.3 | -25.6 | -25.6 | -25.4 | -25.2 | -25.0 | ||
| Compensation of employees, net | -17.1 | -16.0 | -16.3 | -17.0 | -18.1 | -18.6 | -18.4 | -18.4 | -18.5 | -18.5 | -18.6 | ||
| Compensation of employees, credit | 2.9 | 3.0 | 2.7 | 2.6 | 2.5 | 2.9 | 2.8 | 2.8 | 2.8 | 2.9 | 2.9 | ||
| Compensation of employees, debit | 19.9 | 19.0 | 19.1 | 19.6 | 20.7 | 21.5 | 21.2 | 21.3 | 21.3 | 21.4 | 21.5 | ||
| Investment income, net | -10.6 | -14.7 | -13.8 | -12.1 | -8.8 | -7.7 | -7.2 | -7.1 | -6.9 | -6.6 | -6.4 | ||
| Investment income, credit | 496.2 | 425.5 | 376.9 | 345.6 | 389.6 | 342.5 | 329.6 | 322.5 | 316.0 | 309.8 | 303.8 | ||
| Investment income, debit | 506.8 | 440.2 | 390.8 | 357.7 | 398.4 | 350.1 | 336.8 | 329.7 | 322.9 | 316.4 | 310.3 | ||
| Balance on current transfers | 0.3 | 0.0 | -0.4 | -0.6 | -0.5 | 0.2 | 0.2 | 0.2 | 0.2 | 0.2 | 0.2 | ||
| Capital and financial account | -8.9 | -8.6 | -7.9 | -7.7 | -6.8 | -7.0 | -7.3 | -7.3 | -7.2 | -7.3 | -7.2 | ||
| Capital account | -0.1 | -0.1 | 1.0 | 0.2 | -0.3 | -0.3 | -0.3 | -0.3 | -0.3 | -0.3 | -0.3 | ||
| Financial account | 8.7 | 8.5 | 8.9 | 7.9 | 6.5 | 6.7 | 6.9 | 6.9 | 6.9 | 7.0 | 6.9 | ||
| Direct investment, net | 91.9 | 9.4 | 191.0 | 104.0 | 55.1 | 49.6 | 44.7 | 40.2 | 36.2 | 32.6 | 29.3 | ||
| Abroad | -464.3 | -169.0 | 15.9 | -464.7 | -253.2 | -228.0 | -205.3 | -184.8 | -166.3 | -149.7 | -134.7 | ||
| In reporting economy | -556.2 | -178.5 | -175.1 | -568.7 | -308.3 | -277.6 | -250.0 | -225.0 | -202.4 | -182.2 | -164.0 | ||
| Portfolio investment, net | -98.8 | -3.0 | -247.1 | -120.7 | 25.4 | 25.4 | 25.4 | 25.4 | 25.4 | 25.4 | 25.4 | ||
| Portfolio investment, assets | 287.8 | 330.3 | 519.8 | -182.9 | 67.6 | 140.5 | 164.8 | 172.9 | 175.6 | 176.5 | 176.8 | ||
| Portfolio investment, liabilities | 386.6 | 333.3 | 767.0 | -62.2 | 42.2 | 115.1 | 139.4 | 147.5 | 150.2 | 151.1 | 151.4 | ||
| Financial derivatives, net | 16.2 | 9.3 | 18.8 | 14.6 | -5.4 | -5.4 | -5.4 | -5.4 | -5.4 | -5.4 | -5.4 | ||
| Other investment, net | -0.6 | -7.2 | 44.2 | 9.9 | -68.8 | -63.0 | -57.8 | -53.3 | -49.3 | -45.6 | -42.4 | ||
| Other investment, assets | 109.7 | 182.5 | 226.0 | -109.4 | -40.8 | -40.8 | -40.8 | -40.8 | -40.8 | -40.8 | -40.8 | ||
| Other investment, liabilities | 110.4 | 189.7 | 181.8 | -119.3 | 28.0 | 22.2 | 16.9 | 12.5 | 8.5 | 4.8 | 1.6 | ||
| Reserve assets | 0.1 | 0.0 | 2.2 | 0.1 | 0.1 | 0.1 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | ||
| Errors and omissions | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | ||
Includes merchanting trade operations.
Luxembourg: Balance of Payments, 2019–291
(Percent of GDP)
| Projections | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | |||
| Current account | 8.9 | 8.6 | 7.9 | 7.6 | 6.8 | 7.0 | 7.3 | 7.3 | 7.2 | 7.3 | 7.2 | ||
| Balance on goods and services | 36.2 | 39.3 | 38.5 | 37.4 | 34.2 | 33.1 | 32.7 | 32.6 | 32.4 | 32.3 | 32.1 | ||
| Trade balance 1/ | 2.6 | 2.3 | 1.2 | 0.1 | -0.2 | -0.8 | -0.8 | -0.9 | -0.9 | -1.0 | -1.0 | ||
| Goods exports | 38.7 | 33.3 | 33.9 | 33.8 | 32.0 | 31.5 | 31.9 | 32.7 | 33.6 | 34.5 | 35.4 | ||
| Goods imports | 36.1 | 31.0 | 32.7 | 33.6 | 32.3 | 32.3 | 32.7 | 33.6 | 34.5 | 35.5 | 36.5 | ||
| Balance on services | 33.7 | 37.0 | 37.3 | 37.2 | 34.4 | 33.9 | 33.5 | 33.5 | 33.4 | 33.2 | 33.1 | ||
| Services exports | 166.9 | 170.7 | 182.4 | 177.3 | 173.4 | 176.8 | 175.5 | 175.9 | 175.9 | 176.0 | 176.2 | ||
| Services imports | 133.2 | 133.7 | 145.1 | 140.1 | 138.9 | 142.9 | 142.0 | 142.4 | 142.6 | 142.8 | 143.0 | ||
| Net factor income | -27.7 | -30.7 | -30.2 | -29.1 | -26.9 | -26.3 | -25.6 | -25.6 | -25.4 | -25.2 | -25.0 | ||
| Compensation of employees, net | -17.1 | -16.0 | -16.3 | -17.0 | -18.1 | -18.6 | -18.4 | -18.4 | -18.5 | -18.5 | -18.6 | ||
| Compensation of employees, credit | 2.9 | 3.0 | 2.7 | 2.6 | 2.5 | 2.9 | 2.8 | 2.8 | 2.8 | 2.9 | 2.9 | ||
| Compensation of employees, debit | 19.9 | 19.0 | 19.1 | 19.6 | 20.7 | 21.5 | 21.2 | 21.3 | 21.3 | 21.4 | 21.5 | ||
| Investment income, net | -10.6 | -14.7 | -13.8 | -12.1 | -8.8 | -7.7 | -7.2 | -7.1 | -6.9 | -6.6 | -6.4 | ||
| Investment income, credit | 496.2 | 425.5 | 376.9 | 345.6 | 389.6 | 342.5 | 329.6 | 322.5 | 316.0 | 309.8 | 303.8 | ||
| Investment income, debit | 506.8 | 440.2 | 390.8 | 357.7 | 398.4 | 350.1 | 336.8 | 329.7 | 322.9 | 316.4 | 310.3 | ||
| Balance on current transfers | 0.3 | 0.0 | -0.4 | -0.6 | -0.5 | 0.2 | 0.2 | 0.2 | 0.2 | 0.2 | 0.2 | ||
| Capital and financial account | -8.9 | -8.6 | -7.9 | -7.7 | -6.8 | -7.0 | -7.3 | -7.3 | -7.2 | -7.3 | -7.2 | ||
| Capital account | -0.1 | -0.1 | 1.0 | 0.2 | -0.3 | -0.3 | -0.3 | -0.3 | -0.3 | -0.3 | -0.3 | ||
| Financial account | 8.7 | 8.5 | 8.9 | 7.9 | 6.5 | 6.7 | 6.9 | 6.9 | 6.9 | 7.0 | 6.9 | ||
| Direct investment, net | 91.9 | 9.4 | 191.0 | 104.0 | 55.1 | 49.6 | 44.7 | 40.2 | 36.2 | 32.6 | 29.3 | ||
| Abroad | -464.3 | -169.0 | 15.9 | -464.7 | -253.2 | -228.0 | -205.3 | -184.8 | -166.3 | -149.7 | -134.7 | ||
| In reporting economy | -556.2 | -178.5 | -175.1 | -568.7 | -308.3 | -277.6 | -250.0 | -225.0 | -202.4 | -182.2 | -164.0 | ||
| Portfolio investment, net | -98.8 | -3.0 | -247.1 | -120.7 | 25.4 | 25.4 | 25.4 | 25.4 | 25.4 | 25.4 | 25.4 | ||
| Portfolio investment, assets | 287.8 | 330.3 | 519.8 | -182.9 | 67.6 | 140.5 | 164.8 | 172.9 | 175.6 | 176.5 | 176.8 | ||
| Portfolio investment, liabilities | 386.6 | 333.3 | 767.0 | -62.2 | 42.2 | 115.1 | 139.4 | 147.5 | 150.2 | 151.1 | 151.4 | ||
| Financial derivatives, net | 16.2 | 9.3 | 18.8 | 14.6 | -5.4 | -5.4 | -5.4 | -5.4 | -5.4 | -5.4 | -5.4 | ||
| Other investment, net | -0.6 | -7.2 | 44.2 | 9.9 | -68.8 | -63.0 | -57.8 | -53.3 | -49.3 | -45.6 | -42.4 | ||
| Other investment, assets | 109.7 | 182.5 | 226.0 | -109.4 | -40.8 | -40.8 | -40.8 | -40.8 | -40.8 | -40.8 | -40.8 | ||
| Other investment, liabilities | 110.4 | 189.7 | 181.8 | -119.3 | 28.0 | 22.2 | 16.9 | 12.5 | 8.5 | 4.8 | 1.6 | ||
| Reserve assets | 0.1 | 0.0 | 2.2 | 0.1 | 0.1 | 0.1 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | ||
| Errors and omissions | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | ||
Includes merchanting trade operations.
Luxembourg: General Government Operations, 2019–29
(Percent of GDP unless otherwise indicated)
Luxembourg: General Government Operations, 2019–29
(Percent of GDP unless otherwise indicated)
| Est. | Projections | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | ||||
| In percent of GDP | ||||||||||||||
| Revenue | 45.3 | 43.5 | 43.4 | 43.5 | 46.8 | 47.0 | 47.9 | 48.0 | 48.2 | 48.4 | 48.7 | |||
| Taxes | 28.2 | 26.8 | 27.2 | 27.1 | 29.1 | 29.5 | 30.1 | 30.2 | 30.5 | 30.6 | 30.9 | |||
| of which, corporate income taxes | 6.0 | 4.8 | 4.5 | 4.4 | 5.0 | 5.1 | 5.2 | 5.1 | 5.0 | 4.9 | 4.9 | |||
| of which, personal income taxes | 10.8 | 11.1 | 11.3 | 11.6 | 13.0 | 13.1 | 13.4 | 13.6 | 13.8 | 14.0 | 14.2 | |||
| of which, taxes on international trade & | 2.6 | 2.2 | 2.4 | 2.2 | 2.4 | 2.5 | 2.4 | 2.4 | 2.4 | 2.4 | 2.4 | |||
| of which others | 8.8 | 8.7 | 9.0 | 8.9 | 8.6 | 8.8 | 9.0 | 9.1 | 9.2 | 9.2 | 9.3 | |||
| Social contributions | 12.4 | 12.6 | 11.9 | 12.0 | 12.9 | 12.7 | 13.1 | 13.1 | 13.1 | 13.2 | 13.2 | |||
| Grants | 0.0 | 0.1 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |||
| Other revenue | 4.8 | 4.1 | 4.3 | 4.4 | 4.8 | 4.7 | 4.6 | 4.6 | 4.6 | 4.6 | 4.6 | |||
| Expenditure | 43.1 | 47.0 | 42.8 | 43.9 | 48.1 | 49.2 | 49.4 | 49.2 | 49.5 | 49.9 | 50.2 | |||
| Expense | 41.2 | 44.6 | 41.1 | 42.2 | 46.1 | 47.3 | 47.4 | 47.3 | 47.6 | 48.0 | 48.3 | |||
| Compensation of employees | 10.2 | 10.8 | 10.2 | 10.2 | 11.2 | 11.8 | 11.8 | 11.8 | 11.9 | 11.9 | 11.9 | |||
| Use of goods and services | 4.3 | 4.3 | 4.2 | 4.5 | 4.9 | 5.0 | 4.9 | 4.8 | 4.7 | 4.7 | 4.7 | |||
| Interest | 0.3 | 0.2 | 0.2 | 0.2 | 0.3 | 0.4 | 0.5 | 0.6 | 0.6 | 0.7 | 0.7 | |||
| Social benefits | 18.5 | 20.7 | 18.2 | 18.8 | 19.9 | 20.5 | 20.7 | 20.8 | 21.1 | 21.4 | 21.7 | |||
| Other expense | 8.0 | 8.5 | 8.3 | 8.5 | 9.8 | 9.7 | 9.5 | 9.3 | 9.3 | 9.3 | 9.3 | |||
| Gross public investment | 4.1 | 4.7 | 4.1 | 4.2 | 4.7 | 4.6 | 4.8 | 4.7 | 4.6 | 4.7 | 4.7 | |||
| Net acquisition of nonfinancial assets | 1.9 | 2.4 | 1.8 | 1.7 | 2.0 | 1.9 | 2.0 | 1.9 | 1.9 | 1.9 | 1.9 | |||
| Gross operating balance | 6.5 | 1.4 | 4.8 | 4.0 | 3.6 | 2.4 | 3.3 | 3.4 | 3.3 | 3.2 | 3.1 | |||
| Net operating balance | 4.1 | -1.0 | 2.3 | 1.3 | 0.7 | -0.3 | 0.5 | 0.6 | 0.6 | 0.4 | 0.3 | |||
| Net lending / borrowing | 2.2 | -3.4 | 0.5 | -0.4 | -1.3 | -2.2 | -1.5 | -1.3 | -1.3 | -1.5 | -1.6 | |||
| Net acquisition of financial assets | 5.1 | -0.5 | 3.6 | 3.3 | … | … | … | … | ||||||
| Monetary gold and SDRs | … | … | … | … | … | … | … | .. | … | |||||
| Currency and deposits | 3.6 | -1.8 | 2.3 | 1.4 | … | … | … | .. | … | |||||
| Securities other than shares | 0.5 | 1.1 | 2.0 | 0.2 | … | … | … | .. | … | |||||
| Loans | 0.1 | 0.1 | 0.2 | 0.0 | … | … | … | .. | … | |||||
| Shares and other equity | 1.0 | 0.5 | -1.1 | 1.0 | … | … | … | .. | … | |||||
| Insurance technical reserves | … | … | … | … | … | … | … | .. | … | |||||
| Financial derivatives | 0.3 | -0.3 | 0.3 | 0.2 | … | … | … | .. | … | |||||
| Other accounts receivable | -0.4 | -0.2 | -0.2 | 0.4 | … | … | … | … | … | |||||
| Net incurrence of liabilities | 2.9 | 2.9 | 2.7 | 2.8 | … | … | … | … | ||||||
| Special Drawing Rights (SDRs) | … | … | … | … | … | … | … | .. | … | |||||
| Currency and deposits | 0.0 | 0.0 | 0.0 | 0.0 | … | … | … | .. | … | |||||
| Securities other than shares | 2.5 | 3.1 | 3.5 | 1.9 | … | … | … | .. | … | |||||
| Loans | -0.1 | -0.2 | -0.9 | 0.0 | … | … | … | .. | … | |||||
| Shares and other equity | 0.0 | 0.0 | 0.0 | 0.0 | … | … | … | .. | … | |||||
| Insurance technical reserves | 0.0 | 0.0 | 0.0 | 0.0 | … | … | … | .. | … | |||||
| Financial derivatives | 0.0 | 0.0 | 0.0 | 0.0 | … | … | … | .. | … | |||||
| Other accounts payable | 0.5 | 0.0 | 0.1 | 0.9 | … | … | … | … | … | |||||
| Memorandum items: | ||||||||||||||
| GDP (in billions of euro) | 62.4 | 64.5 | 72.4 | 77.5 | 79.3 | 82.2 | 87.1 | 91.0 | 95.0 | 99.1 | 103.4 | |||
| Structural balance | 0.6 | 1.8 | 1.1 | 0.3 | 0.2 | -0.9 | -1.4 | -1.3 | -1.4 | -1.5 | -1.6 | |||
| Output gap (in % of potential GDP) | 0.7 | -1.7 | 2.9 | 2.1 | -1.0 | -1.7 | -0.8 | -0.3 | 0.0 | 0.0 | 0.0 | |||
| Public gross debt (Maastricht definition) | 22.4 | 24.6 | 24.5 | 24.7 | 25.7 | 28.1 | 28.8 | 29.5 | 30.1 | 30.8 | 31.4 | |||
| 10-year sovereign bond yield (annual average in %) | -0.1 | -0.4 | -0.4 | 1.5 | 3.1 | |||||||||
Luxembourg: General Government Operations, 2019–29
(Percent of GDP unless otherwise indicated)
| Est. | Projections | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | ||||
| In percent of GDP | ||||||||||||||
| Revenue | 45.3 | 43.5 | 43.4 | 43.5 | 46.8 | 47.0 | 47.9 | 48.0 | 48.2 | 48.4 | 48.7 | |||
| Taxes | 28.2 | 26.8 | 27.2 | 27.1 | 29.1 | 29.5 | 30.1 | 30.2 | 30.5 | 30.6 | 30.9 | |||
| of which, corporate income taxes | 6.0 | 4.8 | 4.5 | 4.4 | 5.0 | 5.1 | 5.2 | 5.1 | 5.0 | 4.9 | 4.9 | |||
| of which, personal income taxes | 10.8 | 11.1 | 11.3 | 11.6 | 13.0 | 13.1 | 13.4 | 13.6 | 13.8 | 14.0 | 14.2 | |||
| of which, taxes on international trade & | 2.6 | 2.2 | 2.4 | 2.2 | 2.4 | 2.5 | 2.4 | 2.4 | 2.4 | 2.4 | 2.4 | |||
| of which others | 8.8 | 8.7 | 9.0 | 8.9 | 8.6 | 8.8 | 9.0 | 9.1 | 9.2 | 9.2 | 9.3 | |||
| Social contributions | 12.4 | 12.6 | 11.9 | 12.0 | 12.9 | 12.7 | 13.1 | 13.1 | 13.1 | 13.2 | 13.2 | |||
| Grants | 0.0 | 0.1 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |||
| Other revenue | 4.8 | 4.1 | 4.3 | 4.4 | 4.8 | 4.7 | 4.6 | 4.6 | 4.6 | 4.6 | 4.6 | |||
| Expenditure | 43.1 | 47.0 | 42.8 | 43.9 | 48.1 | 49.2 | 49.4 | 49.2 | 49.5 | 49.9 | 50.2 | |||
| Expense | 41.2 | 44.6 | 41.1 | 42.2 | 46.1 | 47.3 | 47.4 | 47.3 | 47.6 | 48.0 | 48.3 | |||
| Compensation of employees | 10.2 | 10.8 | 10.2 | 10.2 | 11.2 | 11.8 | 11.8 | 11.8 | 11.9 | 11.9 | 11.9 | |||
| Use of goods and services | 4.3 | 4.3 | 4.2 | 4.5 | 4.9 | 5.0 | 4.9 | 4.8 | 4.7 | 4.7 | 4.7 | |||
| Interest | 0.3 | 0.2 | 0.2 | 0.2 | 0.3 | 0.4 | 0.5 | 0.6 | 0.6 | 0.7 | 0.7 | |||
| Social benefits | 18.5 | 20.7 | 18.2 | 18.8 | 19.9 | 20.5 | 20.7 | 20.8 | 21.1 | 21.4 | 21.7 | |||
| Other expense | 8.0 | 8.5 | 8.3 | 8.5 | 9.8 | 9.7 | 9.5 | 9.3 | 9.3 | 9.3 | 9.3 | |||
| Gross public investment | 4.1 | 4.7 | 4.1 | 4.2 | 4.7 | 4.6 | 4.8 | 4.7 | 4.6 | 4.7 | 4.7 | |||
| Net acquisition of nonfinancial assets | 1.9 | 2.4 | 1.8 | 1.7 | 2.0 | 1.9 | 2.0 | 1.9 | 1.9 | 1.9 | 1.9 | |||
| Gross operating balance | 6.5 | 1.4 | 4.8 | 4.0 | 3.6 | 2.4 | 3.3 | 3.4 | 3.3 | 3.2 | 3.1 | |||
| Net operating balance | 4.1 | -1.0 | 2.3 | 1.3 | 0.7 | -0.3 | 0.5 | 0.6 | 0.6 | 0.4 | 0.3 | |||
| Net lending / borrowing | 2.2 | -3.4 | 0.5 | -0.4 | -1.3 | -2.2 | -1.5 | -1.3 | -1.3 | -1.5 | -1.6 | |||
| Net acquisition of financial assets | 5.1 | -0.5 | 3.6 | 3.3 | … | … | … | … | ||||||
| Monetary gold and SDRs | … | … | … | … | … | … | … | .. | … | |||||
| Currency and deposits | 3.6 | -1.8 | 2.3 | 1.4 | … | … | … | .. | … | |||||
| Securities other than shares | 0.5 | 1.1 | 2.0 | 0.2 | … | … | … | .. | … | |||||
| Loans | 0.1 | 0.1 | 0.2 | 0.0 | … | … | … | .. | … | |||||
| Shares and other equity | 1.0 | 0.5 | -1.1 | 1.0 | … | … | … | .. | … | |||||
| Insurance technical reserves | … | … | … | … | … | … | … | .. | … | |||||
| Financial derivatives | 0.3 | -0.3 | 0.3 | 0.2 | … | … | … | .. | … | |||||
| Other accounts receivable | -0.4 | -0.2 | -0.2 | 0.4 | … | … | … | … | … | |||||
| Net incurrence of liabilities | 2.9 | 2.9 | 2.7 | 2.8 | … | … | … | … | ||||||
| Special Drawing Rights (SDRs) | … | … | … | … | … | … | … | .. | … | |||||
| Currency and deposits | 0.0 | 0.0 | 0.0 | 0.0 | … | … | … | .. | … | |||||
| Securities other than shares | 2.5 | 3.1 | 3.5 | 1.9 | … | … | … | .. | … | |||||
| Loans | -0.1 | -0.2 | -0.9 | 0.0 | … | … | … | .. | … | |||||
| Shares and other equity | 0.0 | 0.0 | 0.0 | 0.0 | … | … | … | .. | … | |||||
| Insurance technical reserves | 0.0 | 0.0 | 0.0 | 0.0 | … | … | … | .. | … | |||||
| Financial derivatives | 0.0 | 0.0 | 0.0 | 0.0 | … | … | … | .. | … | |||||
| Other accounts payable | 0.5 | 0.0 | 0.1 | 0.9 | … | … | … | … | … | |||||
| Memorandum items: | ||||||||||||||
| GDP (in billions of euro) | 62.4 | 64.5 | 72.4 | 77.5 | 79.3 | 82.2 | 87.1 | 91.0 | 95.0 | 99.1 | 103.4 | |||
| Structural balance | 0.6 | 1.8 | 1.1 | 0.3 | 0.2 | -0.9 | -1.4 | -1.3 | -1.4 | -1.5 | -1.6 | |||
| Output gap (in % of potential GDP) | 0.7 | -1.7 | 2.9 | 2.1 | -1.0 | -1.7 | -0.8 | -0.3 | 0.0 | 0.0 | 0.0 | |||
| Public gross debt (Maastricht definition) | 22.4 | 24.6 | 24.5 | 24.7 | 25.7 | 28.1 | 28.8 | 29.5 | 30.1 | 30.8 | 31.4 | |||
| 10-year sovereign bond yield (annual average in %) | -0.1 | -0.4 | -0.4 | 1.5 | 3.1 | |||||||||
Luxembourg: Central Bank and Depository Corporations Survey, 2016–23
(Million Euros)
Luxembourg: Central Bank and Depository Corporations Survey, 2016–23
(Million Euros)
| 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |||
|---|---|---|---|---|---|---|---|---|---|---|
| CENTRAL BANK | ||||||||||
| Net Foreign Assets | 188653 | 182591 | 190621 | 187071 | 234966 | 283016 | 250706 | 247861 | ||
| Net Domestic Assets | -88192 | -86820 | -87608 | -88153 | -86639 | -78732 | -85345 | -88261 | ||
| Net domestic claims | 6957 | 9403 | 9332 | 8938 | 10398 | 18687 | 11820 | 8771 | ||
| Claims on Central government (net) | 564 | 976 | 1113 | 1156 | 2303 | 3522 | 3529 | 3243 | ||
| Claims on State and Local Government | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||
| Claims on Public Nonfinancial Corporations | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||
| Claims on Private Sector | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||
| Claims on Other Depository Corporations | 4908 | 5666 | 5191 | 4787 | 8092 | 15165 | 8291 | 5528 | ||
| Claims on Other Financial Corporations | 1485 | 2761 | 3028 | 2995 | 3 | 0 | 0 | 0 | ||
| Other items net | -95149 | -96223 | -96940 | -97091 | -97037 | -97419 | -97165 | -97032 | ||
| Monetary Base | 100463 | 95772 | 103014 | 98915 | 148328 | 204284 | 165360 | 159601 | ||
| DEPOSITORY CORPORATIONS | ||||||||||
| Net Foreign Assets | 333219 | 335582 | 354729 | 362097 | 377140 | 423302 | 389377 | 379163 | ||
| Net Domestic Assets | -111617 | -104867 | -107325 | -97938 | -96390 | -95430 | -63274 | -90433 | ||
| Net domestic claims | 104307 | 107283 | 112044 | 119625 | 120731 | 129391 | 148311 | 138702 | ||
| Claims on Central government (net) | 77 | -1320 | -916 | -2276 | 42 | -489 | -1226 | -1168 | ||
| Claims on State and Local Government | 1029 | 958 | 951 | 957 | 972 | 1023 | 1187 | 1341 | ||
| Claims on Public Nonfinancial Corporations | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||
| Claims on Private Sector | 54102 | 58444 | 63501 | 68040 | 71086 | 75229 | 78687 | 76257 | ||
| of which: Private Sector Credit | 52117 | 56830 | 61640 | 66130 | 69323 | 72700 | 76255 | 74014 | ||
| Claims on Other Financial Corporations | 49099 | 49201 | 48508 | 52904 | 48631 | 53628 | 69663 | 62272 | ||
| Other items net | -215924 | -212150 | -219369 | -217563 | -217121 | -224821 | -211585 | -229135 | ||
| Broad Money | 221606 | 230717 | 247406 | 264155 | 280750 | 327879 | 326099 | 288737 | ||
Luxembourg: Central Bank and Depository Corporations Survey, 2016–23
(Million Euros)
| 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |||
|---|---|---|---|---|---|---|---|---|---|---|
| CENTRAL BANK | ||||||||||
| Net Foreign Assets | 188653 | 182591 | 190621 | 187071 | 234966 | 283016 | 250706 | 247861 | ||
| Net Domestic Assets | -88192 | -86820 | -87608 | -88153 | -86639 | -78732 | -85345 | -88261 | ||
| Net domestic claims | 6957 | 9403 | 9332 | 8938 | 10398 | 18687 | 11820 | 8771 | ||
| Claims on Central government (net) | 564 | 976 | 1113 | 1156 | 2303 | 3522 | 3529 | 3243 | ||
| Claims on State and Local Government | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||
| Claims on Public Nonfinancial Corporations | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||
| Claims on Private Sector | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||
| Claims on Other Depository Corporations | 4908 | 5666 | 5191 | 4787 | 8092 | 15165 | 8291 | 5528 | ||
| Claims on Other Financial Corporations | 1485 | 2761 | 3028 | 2995 | 3 | 0 | 0 | 0 | ||
| Other items net | -95149 | -96223 | -96940 | -97091 | -97037 | -97419 | -97165 | -97032 | ||
| Monetary Base | 100463 | 95772 | 103014 | 98915 | 148328 | 204284 | 165360 | 159601 | ||
| DEPOSITORY CORPORATIONS | ||||||||||
| Net Foreign Assets | 333219 | 335582 | 354729 | 362097 | 377140 | 423302 | 389377 | 379163 | ||
| Net Domestic Assets | -111617 | -104867 | -107325 | -97938 | -96390 | -95430 | -63274 | -90433 | ||
| Net domestic claims | 104307 | 107283 | 112044 | 119625 | 120731 | 129391 | 148311 | 138702 | ||
| Claims on Central government (net) | 77 | -1320 | -916 | -2276 | 42 | -489 | -1226 | -1168 | ||
| Claims on State and Local Government | 1029 | 958 | 951 | 957 | 972 | 1023 | 1187 | 1341 | ||
| Claims on Public Nonfinancial Corporations | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||
| Claims on Private Sector | 54102 | 58444 | 63501 | 68040 | 71086 | 75229 | 78687 | 76257 | ||
| of which: Private Sector Credit | 52117 | 56830 | 61640 | 66130 | 69323 | 72700 | 76255 | 74014 | ||
| Claims on Other Financial Corporations | 49099 | 49201 | 48508 | 52904 | 48631 | 53628 | 69663 | 62272 | ||
| Other items net | -215924 | -212150 | -219369 | -217563 | -217121 | -224821 | -211585 | -229135 | ||
| Broad Money | 221606 | 230717 | 247406 | 264155 | 280750 | 327879 | 326099 | 288737 | ||
Luxembourg: Financial Soundness Indicators, 2016–23
(Percent)
Change in underlying data source and calculation methodology (EBA 3).
Luxembourg: Financial Soundness Indicators, 2016–23
(Percent)
| 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |||
|---|---|---|---|---|---|---|---|---|---|---|
| All Banks | ||||||||||
| Capital adequacy | ||||||||||
| Regulatory capital to risk-weighted assets | 25.0 | 25.9 | 24.8 | 22.6 | 24.8 | 23.9 | 23.0 | 24.0 | ||
| Regulatory tier 1 capital to risk-weighted assets | 24.0 | 25.1 | 24.0 | 22.1 | 22.8 | 21.9 | 22.0 | 22.0 | ||
| Common equity tier 1 to risk-weighted assets | ||||||||||
| Capital to assets | 7.0 | 8.4 | 8.0 | 7.4 | 8.6 | 7.9 | 8.0 | 9.0 | ||
| Profitability and efficiency | ||||||||||
| Return on assets | 0.8 | 0.7 | 0.6 | 0.5 | 0.5 | 0.6 | 0.6 | 1.1 | ||
| Return on equity | 11.0 | 8.1 | 7.4 | 7.4 | 6.2 | 5.5 | 5.0 | 9.0 | ||
| Interest margin to gross income | 25.0 | 27.9 | 27.1 | 26.7 | 24.9 | 21.3 | 26.0 | 34.0 | ||
| Trading income to total income | 3.0 | 1.3 | 3.5 | 2.9 | 1.5 | 1.5 | 2.0 | 1.0 | ||
| Noninterest expenses to gross income | 69.0 | 73.6 | 77.5 | 78.8 | 79.5 | 81.1 | 77.0 | 72.0 | ||
| Personnel expenses to noninterest expenses | 25.0 | 25.9 | 24.9 | 25.1 | 24.2 | 22.4 | 22.0 | 22.0 | ||
| Asset quality and structure | ||||||||||
| Residential real estate loans to total loans | 6.2 | 6.2 | 6.8 | 6.9 | 8.5 | 130 1/ | 15.0 | 15.0 | ||
| Household debt to GDP | 60.0 | 59.5 | 59.8 | 64.3 | 69.7 | 71.0 | 72.0 | 72.0 | ||
| Nonperforming loans to total gross loans | 0.9 | 0.8 | 0.9 | 0.7 | 1.0 | 1.3 1/ | ||||