Luxembourg: 2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Luxembourg

IMF Staff Country Reports, May 10, 2019

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Canonical URL: Luxembourg: 2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Luxembourg

Growth prospects remain favorable.
Downside external risks identified:
- weaker-than-expected global growth
- a disorderly Brexit
- changes in international tax rules
- a sharp tightening of global financial conditions
Domestic risks identified:
- rising real estate prices could exacerbate already elevated household indebtedness
- rising real estate prices could increase affordability challenges

Policy recommendation: aim to maintain a strong fiscal position and preserve buffers.
Assessment of government plans:
- The government’s plans are described as appropriate.
- The plans will result in a slightly expansionary budget in 2019.
- The cost and timeline of the planned measures over the medium term remain to be determined.
Given the risks ahead, including from potential changes in international taxation, Luxembourg should build on its strong fiscal record and preserve sizeable buffers.

Structural policy focus: address key gaps in the economy.
Pension system:
- Further reforms of the pension system are needed to ensure its sustainability.
- Reforms should consider intergenerational equity and trade-offs of various reform options.

Subject: Banking, Corporate income tax, Expenditure, Financial institutions, Mutual funds, Pension spending, Public debt, Revenue administration, Taxes
Keywords: Corporate income tax, CR, Europe, Global, government, IMF staff estimate, IMF's article, increase affordability challenge, IP box regime, ISCR, liability positions vis-à-vis nonresident, Luxembourg economy, Luxemburg, Mutual funds, Pension spending, Q4