{
  "title": "IMF Executive Board Concludes 2021 Article IV Consultation with Luxembourg",
  "publication": "IMF News, May 26, 2021",
  "sourceUrl": "https://www.imf.org/en/news/articles/2021/05/25/pr21138-luxembourg-imf-executive-board-concludes-2021-article-iv-consultation",
  "canonical": "https://www.imf.org/en/news/articles/2021/05/25/pr21138-luxembourg-imf-executive-board-concludes-2021-article-iv-consultation",
  "overlayPath": "/en/news/articles/2021/05/25/pr21138-luxembourg-imf-executive-board-concludes-2021-article-iv-consultation/index.md",
  "summary": "IMF Executive Board concluded the Article IV consultation with Luxembourg on May 14, 2021.",
  "publishDate": "2021-05-26",
  "sections": [
    {
      "heading": "Overview and Outlook",
      "content": "- IMF Executive Board concluded the Article IV consultation with Luxembourg on May 14, 2021.\n- Luxembourg experienced a mild contraction in 2020 and a rebound in 2021:\n  - Real GDP: -1.3 percent in 2020; expected to rebound by about 4 percent in 2021.\n- Drivers of resilience:\n  - Unprecedented policy support domestically and globally.\n  - Quick adjustment to teleworking.\n  - Large and multi-pronged government policy package in 2020, followed by more targeted stimulus in 2021.\n- Medium-term outlook:\n  - Recovery expected, but output projected to remain below pre-crisis trend, partly reflecting impairment in corporate balance sheets and scarring in the labor market.\n- Risks to the outlook:\n  - Tilted to the downside; dominated by virus dynamics in the near term.\n  - Upside: quicker containment of infection could accelerate activity recovery.\n  - Downside: prolongation of the health crisis into 2021 could delay recovery.\n  - Broader risks: tightening of global financial conditions, acceleration of de-globalization, revenue risk from changes in international taxation."
    },
    {
      "heading": "Executive Board Assessment",
      "content": "- Directors agreed with the thrust of the staff appraisal and commended the authorities’ timely and broad-based policy response that supported households and firms and limited economic fallout.\n- Key policy guidance from Directors:\n  - Maintain targeted policy support until the recovery is firmly established; unwinding of policy support should be state contingent and well calibrated.\n  - As recovery strengthens, pivot fiscal policy toward:\n    - Further greening the economy.\n    - Digitalization.\n    - Closing infrastructure gaps.\n  - Preserve buffers to guard against fiscal risks from changing international taxation and reaching CO2 targets.\n  - Continue diversifying revenues while reducing the carbon footprint.\n  - Strengthen public investment management and the procurement framework.\n- Financial sector guidance:\n  - Continue addressing rising risks in the financial sector in line with FSAP recommendations.\n  - Banking sector expected to remain resilient given large capital and liquidity buffers, but solvency risks could materialize if state support is withdrawn prematurely or recovery is delayed.\n  - Welcome intensification of oversight of the investment fund sector; encourage further strengthening of macroprudential surveillance and regulation of the sector.\n  - Monitor high household indebtedness; revisit loan-to-value limits and explore other tools in the legal framework if indebtedness continues to rise.\n  - Revisit macroprudential stance if pressures in credit markets reemerge as recovery gains ground.\n  - Recommend further strengthening the AML/CFT framework.\n- Labor and social policy guidance:\n  - Commended authorities’ efforts to support employment, particularly vulnerable workers.\n  - As recovery strengthens, shift focus from preserving jobs to facilitating reallocation of workers to dynamic sectors, including through training programs.\n  - Encourage further steps to increase housing supply and improve inclusiveness in the housing market.\n  - Deepening the market for sustainable finance will help diversify the financial sector."
    },
    {
      "heading": "Key Macroeconomic Projections and Indicators (Table 1: Luxembourg: Selected Economic Indicators, 2019-22)",
      "content": "- Projections cover 2019, 2020, 2021, 2022. Values given as in source.\n\n- Real economy (change in percent)\n  - Real GDP: 2.3; -1.3; 4.1; 3.6\n  - Domestic demand: 3.3; -4.4; 4.4; 3.5\n  - Foreign balance (contr. to GDP growth): 0.2; 1.3; 1.9; (no value for 2022 shown)\n\n- Prices\n  - CPI (national definition): 1.7; 0.8; 1.8; (no value for 2022 shown)\n  - GDP deflator: 3.4; 2.5; (no values for 2021-22 shown)\n\n- Public finance (percent of GDP)\n  - General government balance: 2.4; -4.1; -1.6; -0.6\n  - Revenue: 44.7; 43.7; 43.2; 42.8\n  - Expenditure: 42.3; 47.8; 44.8; 43.4\n  - Structural balance (percent of pot. GDP): 2.1; -3.3; -0.5; (no value for 2022 shown)\n  - General government gross debt: 22.0; 24.9; 26.7; 27.3\n\n- Labor market (percent change)\n  - Total employment: 2.0; 1.6; (no values for 2021-22 shown)\n  - Resident labor force: 2.7; 2.8; 2.2; (no value for 2022 shown)\n  - Unemployment rate (percent): 5.4; 6.3; 6.7; 6.4\n\n- Credit growth (percent)\n  - Growth of credit to the private non-financial sector: 7.2; 5.0; 11.3; 9.4\n\n- Balance of payments (percent of GDP)\n  - Current account: 4.6; 4.3; 4.9; (no value for 2022 shown)\n  - Balance on goods: 3.8; 4.0; (no values for 2021-22 shown)\n  - Balance on services: 33.7; 33.1; 33.2; 33.5\n  - Net factor income: -33.4; -31.1; -32.7; -32.9\n  - Balance on current transfers: -0.7; -1.5; 0.3; (no value for 2022 shown)\n\n- Exchange rates\n  - U.S. dollars per euro, period average: 1.1; ...\n  - NEER, CPI based (2010=100, +=appreciation): 101.5; 103.2; (no values for 2021-22 shown)\n  - REER, CPI based (2010=100, +=appreciation): 99.5; 100.8; (no values for 2021-22 shown)\n\n- Potential output and output gap\n  - Potential output (change in percent): 3.2; 1.0; 3.1; 3.0\n  - Output gap: 0.6; -1.7; -0.8; -0.2"
    },
    {
      "heading": "Policy Recommendations and Priorities (summarized)",
      "content": "- Maintain targeted, state-contingent, and well-calibrated policy support until recovery is firmly established.\n- Pivot fiscal policy toward greening the economy, digitalization, and closing infrastructure gaps as recovery strengthens.\n- Preserve fiscal buffers to guard against international taxation changes and CO2 target-related risks.\n- Continue revenue diversification while reducing carbon footprint.\n- Strengthen public investment management and procurement.\n- Intensify oversight and macroprudential regulation of the investment fund sector.\n- Monitor and address high household indebtedness; consider loan-to-value limits and other legal tools if indebtedness rises.\n- Revisit macroprudential stance if credit market pressures reemerge.\n- Strengthen the AML/CFT framework.\n- Shift labor policy from job preservation to facilitating worker reallocation to dynamic sectors via training.\n- Increase housing supply and improve housing market inclusiveness.\n- Deepen the market for sustainable finance to diversify the financial sector.\n\nIMF Executive Board press release: IMF Executive Board Concludes 2021 Article IV Consultation with Luxembourg (Press Release No. 21/138; May 26, 2021).\n\n---\n\n\n References\n\n- https://www.imf.org/-/media/images/imf/bios/imfboard.jpg\n- The Executive Board\n- Luxembourg and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- http://www.imf.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2021/05/25/pr21138-luxembourg-imf-executive-board-concludes-2021-article-iv-consultation"
    }
  ],
  "bullets": [
    "[Markdown version](/en/news/articles/2021/05/25/pr21138-luxembourg-imf-executive-board-concludes-2021-article-iv-consultation/index.md)",
    "[Structured JSON version](/en/news/articles/2021/05/25/pr21138-luxembourg-imf-executive-board-concludes-2021-article-iv-consultation/index.json)",
    "[Bundle manifest](/en/news/articles/2021/05/25/pr21138-luxembourg-imf-executive-board-concludes-2021-article-iv-consultation/bundle-manifest.json)",
    "Published: May 26, 2021",
    "IMF Executive Board concluded the Article IV consultation with Luxembourg on May 14, 2021.",
    "Luxembourg experienced a mild contraction in 2020 and a rebound in 2021:",
    "Drivers of resilience:",
    "Medium-term outlook:",
    "Risks to the outlook:",
    "Directors agreed with the thrust of the staff appraisal and commended the authorities’ timely and broad-based policy response that supported households and firms and limited economic fallout.",
    "Key policy guidance from Directors:",
    "Financial sector guidance:",
    "Labor and social policy guidance:",
    "Projections cover 2019, 2020, 2021, 2022. Values given as in source.",
    "Real economy (change in percent)",
    "Prices",
    "Public finance (percent of GDP)",
    "Labor market (percent change)",
    "Credit growth (percent)",
    "Balance of payments (percent of GDP)",
    "Exchange rates",
    "Potential output and output gap",
    "Maintain targeted, state-contingent, and well-calibrated policy support until recovery is firmly established.",
    "Pivot fiscal policy toward greening the economy, digitalization, and closing infrastructure gaps as recovery strengthens.",
    "Preserve fiscal buffers to guard against international taxation changes and CO2 target-related risks.",
    "Continue revenue diversification while reducing carbon footprint.",
    "Strengthen public investment management and procurement.",
    "Intensify oversight and macroprudential regulation of the investment fund sector.",
    "Monitor and address high household indebtedness; consider loan-to-value limits and other legal tools if indebtedness rises.",
    "Revisit macroprudential stance if credit market pressures reemerge.",
    "Strengthen the AML/CFT framework.",
    "Shift labor policy from job preservation to facilitating worker reallocation to dynamic sectors via training.",
    "Increase housing supply and improve housing market inclusiveness.",
    "Deepen the market for sustainable finance to diversify the financial sector.",
    "[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)"
  ],
  "alternates": {
    "markdown": "/en/news/articles/2021/05/25/pr21138-luxembourg-imf-executive-board-concludes-2021-article-iv-consultation/index.md",
    "json": "/en/news/articles/2021/05/25/pr21138-luxembourg-imf-executive-board-concludes-2021-article-iv-consultation/index.json",
    "bundleManifest": "/en/news/articles/2021/05/25/pr21138-luxembourg-imf-executive-board-concludes-2021-article-iv-consultation/bundle-manifest.json"
  },
  "generatedAtUtc": "2026-09-26T00:24:19.931Z"
}