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Growth is projected to remain strong, as domestic demand, notably private consumption, is boosted by strong wages and exports of financial and other business services. The accommodative monetary policy stance in the euro area will support access to credit and valuations of financial assets. Continued strong job creation, even though partly benefitting cross-border workers, is projected to reduce unemployment further to 5½ per cent.
Fiscal space is being used for a welcome tax reform incentivising labour market participation. In addition, increases in taxes on transport fuels could be used to further promote green growth. The financial sector remains the main engine of growth and the efforts to diversify the economy, focussing on digital technology and renewable resources, are thus welcome. Diversification policies should be complemented by policies facilitating the relocation of labour, including measures to increase the supply of housing.
Economic Survey of Luxembourg (survey page)