Luxembourg: 2025 Article IV Consultation-Press Release; and Staff Report
IMF Staff Country Reports, June 5, 2025
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- Luxembourg: 2025 Article IV Consultation-Press Release; and Staff Report
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Bibliographic details
- Published: June 5, 2025
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9798229011754.002
Key findings and outlook
- Luxembourg’s fundamentals remain strong.
- An economic recovery is projected to slowly gain pace amidst external headwinds.
- Downside risks prevail in the short term.
- The fiscal balance improved to a surplus of 1 percent of gross domestic product in 2024, boosted by one-off revenues.
- The financial sector is resilient, with well-capitalized and liquid banks.
- Vulnerabilities that should continue to be closely monitored include the housing market and other pockets of vulnerability.
Fiscal position and risks
- Fiscal balance: surplus of 1 percent of gross domestic product in 2024, driven by one-off revenues.
- Given structurally high revenue volatility, prudent fiscal policy should be based on a more efficient use of fiscal space.
Financial sector and stability
- The financial sector is described as resilient.
- Banks are well-capitalized and liquid.
- While risks are manageable, monitoring of the housing market and other vulnerability pockets is recommended.
Structural challenges and labor market
- Structural reforms are needed to boost private sector-led growth and sustain living standards.
- Wage indexation has become a key constraint on competitiveness.
- More labor market flexibility is called for to alleviate rigidity.
Policy recommendations and priorities
- Base prudent fiscal policy on more efficient use of fiscal space due to high revenue volatility.
- Boost productivity and contain the cost of living by:
- Streamlining the regulatory and administrative burden.
- Removing barriers to entry in some sectors.
- Addressing housing and infrastructure supply bottlenecks.
- Increase labor market flexibility to address wage indexation constraints on competitiveness.
Luxembourg: 2025 Article IV Consultation-Press Release; and Staff Report — June 5, 2025
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