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Growth is strong and projected to stay robust in 2019 and 2020. Domestic demand will support economic activity, with private consumption boosted by a buoyant labour market and lasting effects of tax reform. Growth momentum in the euro area will support solid exports of financial and non-financial services. Continued job creation will primarily benefit cross-border workers, but also help to reduce the unemployment rate to just above 5%.
Fiscal policy is sound and could be used to enhance green growth through higher transport fuel taxes. Reliance on the financial sector exposes Luxembourg to increased financial volatility transmitted by international investment funds, which warrants ongoing monitoring of such institutions and the continued diversification of the economy. Constraints on the supply of housing need to be addressed, as house prices continue to increase and household indebtedness is high.
Source: OECD Analytical House Price database; and OECD Economic Outlook 104 database.
Economic Survey of Luxembourg (survey page)