## IMF Executive Board Concludes 2019 Article IV Consultation with Luxembourg

_IMF News, May 13, 2019_

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## Bibliographic details
- Published: May 13, 2019

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### Overview
- Date: May 13, 2019
- On May 8, 2019, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Luxembourg.
- Recent performance: GDP growth reached 2.6 percent in 2018, above the EU average.
- Fiscal position: fiscal surplus estimated at about 2.4 percent of GDP in 2018.
- Labor market: unemployment at record post-crisis lows; confidence indicators well above long-term averages.
- Current assessment: the economy is currently operating close to its potential.

### Growth prospects and risks
- Growth drivers:
  - Strong private consumption.
  - Positive contribution of the external sector.
  - Sound economic policies, a qualified workforce, and favorable global economic conditions.
- Downside risks identified:
  - Weaker-than-expected global growth.
  - A disorderly Brexit.
  - Changes in international tax rules.
  - A sharp tightening of global financial conditions.
  - Domestic risk: rising real estate prices could exacerbate already elevated household indebtedness and increase affordability challenges.

### Executive Board Assessment — Findings and recommendations
- Commendations:
  - Authorities praised for sound economic policies supporting a favorable growth outlook.
  - Strong fiscal position and low public debt lauded.
  - Continued commitment to implement European and global tax transparency and anti‑tax avoidance initiatives commended.
  - Progress in implementing the 2017 Financial Stability Assessment Program recommendations welcomed.
  - Authorities commended for strengthening AML/CFT legislation and finalizing their first National Risk Assessment.
- Fiscal policy guidance:
  - Directors encouraged the authorities to maintain prudent fiscal policies and to maintain adequate buffers.
  - Directors welcomed fiscal plans aimed at lifting the economy’s potential and making growth more inclusive by increasing public investment and introducing more growth‑friendly, equitable, and “green” taxation.
  - Directors noted the need to quantify revenue risks arising from the changing international tax environment and consider mitigating measures.
- Financial sector resilience:
  - Need to further enhance oversight of the highly interconnected financial sector.
  - Continue to strengthen supervision of banks’ large cross‑border exposures.
  - Complete resolution plans for less systemic banks and implement Luxembourg’s component of the euro area credit register.
  - In the investment fund sector, system‑wide supervision and cooperation with relevant jurisdictions should be further enhanced.
  - Recent measures to enhance macroprudential surveillance welcomed; Directors called for close monitoring of real estate market developments and vulnerabilities from high household indebtedness.
  - Recommendation to alleviate housing supply constraints and expand the macroprudential policy toolkit, introducing borrower‑based mortgage lending limits.
- Pensions and labor market:
  - Luxembourg’s pension system is sound over the near term, but further reforms have merit to ensure long‑term sustainability.
  - Given long lags of pension reforms, engage with key stakeholders in a timely manner, taking into account intergenerational equity and tradeoffs of various reform options.
  - Key structural gaps need to be addressed to boost economic potential and make growth more inclusive.
  - While youth and low‑skilled have benefited most from recent strong job creation, more needs to be done to tackle structural unemployment and low elderly labor market participation.

### Selected economic indicators (2014–19)
- Real GDP (Change in percent, unless otherwise indicated):
  - 2014: 4.3
  - 2015: 3.9
  - 2016: 2.4
  - 2017: 1.5
  - 2018: 2.6
- Gross investment:
  - 2014: 12.2
  - 2015: -4.7
  - 2016: 7.6
  - 2017: 1.2
  - 2018: 0.6
- Unemployment (percent of the labor force):
  - 2014: 7.1
  - 2015: 6.8
  - 2016: 6.3
  - 2017: 5.9
  - 2018: 5.5
  - 2019 Est.: 5.0
- Resident employment (thousands):
  - 2014: 239.7
  - 2015: 244.8
  - 2016: 250.3
  - 2017: 257.3
  - 2018: 264.5
  - 2019 Proj.: 271.7
- Total employment (thousands):
  - 2014: 396.0
  - 2015: 406.1
  - 2016: 418.4
  - 2017: 432.8
  - 2018: 449.0
  - 2019 Proj.: 464.3
- CPI (harmonized), p.a.:
  - 2014: 0.7
  - 2015: 0.1
  - 2016: 0.0
  - 2017: 2.1
  - 2018: 2.0
  - 2019 Proj.: 1.6
- Public finances (Percent of GDP):
  - General government revenues:
    - 2014: 43.3
    - 2015: 43.7
    - 2016: 44.4
    - 2017: 45.5
    - 2018: 44.6
  - General government expenditures:
    - 2014: 42.0
    - 2015: 41.9
    - 2016: 43.0
    - 2017: 43.1
    - 2018: 43.6
  - General government balance:
    - 2014: 1.3
    - 2015: 1.4
    - 2016: 1.9
    - 2017: 0.9
  - General government gross debt:
    - 2014: 22.7
    - 2015: 22.2
    - 2016: 20.7
    - 2017: 23.0
    - 2018: 21.4
    - 2019 Est.: 21.5
- Balance of payments:
  - Current account balance:
    - 2014: 5.2
    - 2015: 5.1
    - 2016: 4.7
    - 2017: 4.6
  - Balance of trade in goods and services:
    - 2014: 33.3
    - 2015: 36.8
    - 2016: 35.5
    - 2017: 33.0
    - 2018: 31.0
    - 2019 Proj.: 29.2
  - Factor income balance:
    - 2014: -28.6
    - 2015: -33.0
    - 2016: -31.7
    - 2017: -27.5
    - 2018: -25.9
    - 2019 Proj.: -25.0
  - Transfer balance:
    - 2014: 0.5
    - 2015: -0.5
    - 2016: 0.3
- Exchange rates:
  - U.S. dollar per euro:
    - 2014: 1.1
    - 2015: …
  - Nominal effective rate (2010=100):
    - 2014: 100.5
    - 2015: 97.0
    - 2016: 98.9
    - 2017: 101.5
    - 2018: 103.5

*Source: IMF Executive Board conclusions on the 2019 Article IV consultation with Luxembourg.*

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## References

- [https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)
- [The Executive Board](https://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/2019/05/10/pr19158-luxembourg-imf-executive-board-concludes-2019-article-iv-consultation_