Luxembourg: 2023 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Luxembourg
IMF Staff Country Reports, May 24, 2023
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- Luxembourg: 2023 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Luxembourg
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Bibliographic details
- Published: May 24, 2023
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9798400242212.002
Executive summary and outlook
- Luxembourg has shown resilience in the aftermath of the war in Ukraine and accelerated tightening of global financial conditions, partly helped by fiscal support.
- Growth is expected to slow to about 1 percent in 2023, before gradually recovering to its potential percent over the medium term.
- Headline inflation is likely to moderate further but core inflation is expected to remain persistent.
- The near-term outlook is highly uncertain.
Inflation and wage indexation
- Policy measures, although costly, have helped temporarily keeping inflation below the levels in most euro area peers and limiting the number of wage indexations.
- Core inflation is expected to remain persistent even as headline inflation moderates.
Financial sector conditions and vulnerabilities
- Tighter financial conditions have started to affect the financial sector, with heterogeneity across segments.
- The financial sector, overall, remains resilient.
- Pockets of vulnerabilities are identified, especially in the real estate sector and non-bank financial institutions.
Risks
- Risks are tilted to the downside and stem from:
- a deeper global slowdown,
- a de anchoring of inflation expectations,
- systemic financial instability at the global level.
Subject focus and keywords
- Subject: Energy prices, Financial institutions, Inflation, International organization, Labor, Loans, Monetary policy, Mutual funds, Prices, Wage indexation
- Keywords: central bank of Luxembourg, Energy prices, Europe, Global, Inflation, liability positions vis-a-vis nonresident, Loans, Luxembourg economy, money market rate, Mutual funds, policy advice, Wage indexation
Content in this bundle
- 1luxea2023001