## IMF Executive Board Concludes 2017 Article IV Consultation with Luxembourg _IMF News, May 10, 2017_ ## Source details **Canonical URL:** [IMF Executive Board Concludes 2017 Article IV Consultation with Luxembourg](https://www.imf.org/en/news/articles/2017/05/10/pr17158-imf-executive-board-concludes-2017-article-iv-consultation-with-luxembourg) ## Other formats - [Markdown version](/en/news/articles/2017/05/10/pr17158-imf-executive-board-concludes-2017-article-iv-consultation-with-luxembourg/index.md) - [Structured JSON version](/en/news/articles/2017/05/10/pr17158-imf-executive-board-concludes-2017-article-iv-consultation-with-luxembourg/index.json) - [Bundle manifest](/en/news/articles/2017/05/10/pr17158-imf-executive-board-concludes-2017-article-iv-consultation-with-luxembourg/bundle-manifest.json) ## Bibliographic details - Published: May 10, 2017 --- ### Summary and context - Date of press release: May 10, 2017 - Press office: IMF Communications Department; PRESS OFFICER: Bruno Silvestre; Phone: +1 202 623-7100; Email: MEDIA@IMF.org - On May 5, 2017, the Executive Board concluded the Article IV consultation with Luxembourg. - Luxembourg’s economy benefits from a major role in intermediating international capital flows and competitive advantages including fiscal stability, a qualified workforce, and business-friendly regulations and oversight. ### Growth and labor market - Economic growth reached 4.2 percent in 2016, driven by net exports of financial services. - Growth projection for 2017: 3.8 percent. - Continued strong job creation and a pick-up in inflation are expected. - Selected labor and price indicators: - Unemployment (percent of the labor force): 2016 = 6.4; 2017 (Est./Proj.) = 5.9 - Resident employment (thousands): 2016 = 249.9; 2017 = 255.8 - Total employment (thousands): 2016 = 418.5; 2017 = 429.1 - CPI (harmonized), p.a.: 2016 = 0.0; 2017 = 1.2 ### Public finances and fiscal outlook - In 2016, buoyant tax revenues from higher-than-expected economic activity contributed to a fiscal surplus of 1.6 percent of GDP. - The 2017 tax reform is expected to result in a drop in the fiscal surplus and a broadly balanced budget over the medium term. - Key public finance figures (Percent of GDP): - General government revenues: 2016 = 41.4 - General government expenditures: 2016 = 41.1; 2017 = 41.2 - General government balance: 2016 = 1.6; 2017 = 0.2 - General government gross debt: 2016 = 20.0; 2017 = 20.8 - Directors endorsed further widening the corporate tax base and maintaining fiscal buffers, including low public debt over the medium term. - Directors considered contingency measures should be put in place to address revenue risks from implementation of tax transparency and anti-tax avoidance initiatives, and from volatile financial flows. ### External sector and vulnerabilities - Luxembourg remains vulnerable to lower-than-expected growth in Europe and challenges to the euro area architecture. - Downsides to growth include: - A retreat from cross-border integration. - Policy uncertainty in the U.S. and related to upcoming elections in Europe and Brexit causing potential financial market volatility. - Ongoing implementation of international tax transparency and anti-tax avoidance agenda, which could weigh on economic activity and tax revenue (but could also accentuate other competitive advantages by creating a level playing field). - Balance of payments indicators: - Current account balance: 2016 = 4.6 - Balance of trade in goods and services: 2016 = 33.9; 2017 = 32.0 - Factor income balance: 2016 = -30.5; 2017 = -28.5 - Transfer balance: 2016 = 1.1; 2017 = 1.5 ### Financial sector oversight and risks — Executive Board recommendations - Directors praised prudent policies and strong institutions underpinning robust macroeconomic performance. - Key supervisory and financial sector recommendations: - Continue to move toward risk-based supervision. - Increase resources for entities safeguarding stability of the large and interconnected financial system. - Strengthen oversight of investment funds, including on-site and comprehensive inspections, system-wide stress testing, and engagement with foreign regulators where delegated activities are undertaken. - Implement more active supervision of waivers of the large exposure limit of foreign oriented banks. - Reinforce oversight of nonbank holding companies that include banks and improve risk monitoring. - Continue close monitoring of risks in the real estate market and stand ready to adjust policies if necessary. - Increase the capital of the central bank to bolster its financial buffer. ### Structural reforms and long-term policies - Directors welcomed authorities’ structural reform efforts to expand activity beyond the financial sector to enhance resilience. - Recommended policy areas for further action: - Additional product market reforms. - Active labor market policies. - Education reform to reduce skills mismatches and inactivity traps. - Measures to ease supply side constraints in the real estate market. - Continued reform of the pension system to ensure long‑term viability. ### Selected Economic Indicators, 2012–17 (highlights) - Real GDP (Change in percent): - 2012 = -0.4; 2013 = 4.0; 2014 = 5.6; 2015 = 4.2; 2016 = 3.8 - Gross investment (Change in percent): - 2012 = 0.9; 2013 = -2.4; 2014 = 8.3; 2015 = 3.4; 2016 = -0.8; 2017 = 2.6 - Public finance ratios (Percent of GDP): - General government revenues: 2012 = 44.4; 2013 = 44.3; 2014 = 43.2; 2015 = 42.7; 2016 = 41.4 - General government expenditures: 2012 = 44.1; 2013 = 43.3; 2014 = 41.8; 2015 = 41.3; 2016 = 41.1 - Public debt (Percent of GDP): - General government gross debt: 2012 = 21.7; 2013 = 23.4; 2014 = 22.4; 2015 = 21.6; 2016 = 20.0; 2017 = 20.8 - Exchange rates: - Member of the euro area - U.S. dollar per euro: 2012 = 1.3 - Nominal effective rate (2010=100): 2012 = 98.1; 2013 = 100.2; 2014 = 100.5; 2015 = 97.0; 2016 = 98.9 *Source: IMF Executive Board press release — "IMF Executive Board Concludes 2017 Article IV Consultation with Luxembourg", May 10, 2017.* --- ## References - [The Executive Board](http://www.imf.org/external/np/sec/memdir/eds.aspx) - [Luxembourg and the IMF](http://www.imf.org/external/country/LUX/index.htm) - [IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance) - [Press Releases](https://www.imf.org/en/news/searchnews) - [PRESS CENTER](http://presscenter.imf.org/) - [http://www.imf.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm) - [https://www.imf.org/en/home](https://www.imf.org/en/home) _Source: https://www.imf.org/en/news/articles/2017/05/10/pr17158-imf-executive-board-concludes-2017-article-iv-consultation-with-luxembourg_