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Luxembourg: Economic and Political Outline
Economic Indicators | Foreign Trade in Figures | Sources of General Economic Information | Political Outline
Luxembourg’s economy is characterized by an attractive taxation system and a high degree of international openness. The financial sector alone represents almost half of the total GDP of the country, making it very vulnerable to the international economic crisis. While during the last recent years, the country was obtaining an average growth rate of around 5% per year; in 2008, Luxembourg went into recession. In 2009, its growth stabilized to reach 2.7% in 2010 and 3.6% in 2011. Strong domestic demand and rising public investment explain the country's good performance, which set it above the European average in 2011. In 2011, unemployment was 4.7%, after it had exceeded 6% of the total workforce in 2009.
In addition, the public dept reached 20% of the GDP in 2011. Luxembourg has the highest GDP per capita in the European Union. The competitiveness of Luxembourg's companies is also one of the highest in the world.
In 2012, the country expects a continued growth of around 3% and its budget remains on a very rigorous policy which controls public expenditures. This budget should allow the country to rapidly recover its economy, which, in spite of all, is still very dependent of the global economy.
The Grand Duchy is currently seeking to diversify its economic activities, focusing on the knowledge economy, which will showcase the new development center Belval-West, on the border between France and Luxembourg.
| Main Indicators | 2009 | 2010 | 2011 | 2012 (e) | 2013 (e) |
| GDP (billions USD) | 53.03 | 55.20e | 62.94 | 66.10 | 68.00 |
| GDP (Constant Prices, Annual % Change) | -3.6 | 3.5e | 3.6e | 2.7 | 2.7 |
| GDP per Capita (USD) | 106,631 | 108,952e | 122,272 | 126,326 | 127,819 |
| General Government Gross Debt (in % of GDP) | 14.6 | 18.4 | 19.7e | 21.5 | 23.8 |
| Inflation Rate (%) | 0.4 | 2.3 | 3.6e | 1.4 | 1.6 |
| Unemployment Rate (% of the Labor Force) | 5.8 | 6.2 | 5.8 | 6.0 | 6.3 |
| Current Account (billions USD) | 3.64 | 4.32 | 6.16 | 6.79 | 6.82 |
| Current Account (in % of GDP) | 6.9 | 7.8e | 9.8e | 10.0 | - |
Source: IMF - World Economic Outlook Database ; World Bank , Last Available Data
Note: (e) Estimated Data
The agricultural sector is not well developed. It contributes only 0.4% to the GDP and employs less than 1.5% of the active population. The country's main crops are wine, wood, cereals and potatoes.
The industrial sector (16% of the GDP in 2011), has historically been dominated by the production of iron and steel. In these recent years, this trend was diversified, thus chemical factories, plastic products and light engineering have been added. The steel industry contributes around 10% to the GDP.
Like all developed countries, a large part of the GDP is attributed to the tertiary sector. This sector represents almost 83% of the national wealth, and more than half of it, is attributed exclusively to financial and real estate services. Luxembourg is one of the world's largest money markets and the second largest investment fund manager in the world.
| Breakdown of Economic Activity By Sector | Agriculture | Industry | Services |
| Employment By Sector (in % of Total Employment) | 1.3 | 12.4 | 78.4 |
| Value Added (in % of GDP) | 0.3 | 13.1 | 86.6 |
| Value Added (Annual % Change) | 19.2 | -7.4 | -2.7 |
Source: World Bank - Last Available Data.
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Distribution of Economic freedom in the world
Source: 2011 Index of Economic freedom, Heritage Foundation
Note: The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labor freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.
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Luxembourg performs almost 90% of its foreign trade with the EU countries. Luxembourg offers a favorable climate to foreign investment. The share of foreign trade in the country’s GDP is around 300%. The trade deficit remains constant in Luxembourg's current economy.
In recent years, Luxembourg has significantly expanded the sector of insurance, especially by introducing the Freedom of Services (LPS) principle for other EU member states. It also seeks to diversify its economy, too dependent on the financial sector: it tries to develop its strengths in order to position itself as a media center and new information and communication technologies hub, and to attract electronic services businesses, especially e-commerce as the Grand Duchy has a VAT rate of 15%, which is very attractive for implementations of third country companies in Europe (e.g. Amazon, Microsoft, AOL or E-Bay).
The country's three main trade partners (both for imports & exports) are: Germany, France and Belgium, Germany being the largest client and Belgium the largest supplier. Luxembourg mainly exports iron & steel, electric and electronic equipment, machinery and plastics. The country's main imports are mineral fuels & oil, vehicles, electric & electronic equipment, machinery, iron and steel.
Luxembourg has accomplished a diversification of its exports outside the European Union and the country currently has trade relations with Asian and Middle Eastern countries. The country has a trade balance surplus and this comes from its high value-added exports.
| Foreign Trade Indicators | 2007 | 2008 | 2009 | 2010 | 2011 |
| Imports of Goods (million USD) | 27,566 | 31,585 | 24,514 | 24,073 | 28,865 |
| Exports of Goods (million USD) | 22,390 | 25,332 | 21,114 | 19,638 | 21,791 |
| Imports of Services (million USD) | 37,572 | 39,983 | 35,518 | 36,593 | 40,354 |
| Exports of Services (million USD) | 64,375 | 68,756 | 59,924 | 66,189 | 71,645 |
| Imports of Goods and Services (Annual % Change) | 9.3 | 8.5 | -10.3 | - | - |
| Exports of Goods and Services (Annual % Change) | 5.5 | - | - | - | - |
| Imports of Goods and Services (in % of GDP) | 143.6 | 145.9 | 134.6 | - | - |
| Exports of Goods and Services (in % of GDP) | 175.9 | 178.4 | 167.5 | - | - |
| Trade Balance (million USD) | -4,801 | -6,339 | -4,323 | -5,286 | - |
| Trade Balance (Including Service) (million USD) | 22,510 | 23,062 | 20,728 | 24,891 | - |
| Foreign Trade (in % of GDP) | 319.6 | 324.3 | 302.1 | - | - |
Source: WTO - World Trade Organization ; World Bank , Last Available Data
| Main Customers (% of Exports) |
2011 |
| Germany | 27.2% |
| France | 15.9% |
| Belgium | 12.1% |
| Netherlands | 5.0% |
| Italy | 4.2% |
| See More Countries | 35.6% |
| Main Suppliers (% of Imports) |
2010 |
| Germany | 25.6% |
| Belgium | 24.8% |
| France | 14.9% |
| Netherlands | 4.1% |
| Italy | 2.7% |
| See More Countries | 27.9% |
Source: Comtrade, Last Available Data
Source: Comtrade, Last Available Data
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Note: The world rankings, published annually, measures the violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position is assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire sent to partner organizations,150 RWB correspondents, journalists, researchers, jurists and activists of human rights, including the main criteria - 44 in total - to assess the situation of press freedom in a given country. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).
Map of freedom 2010
Source: Freedom House
Note: The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.
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Last Updates: May 2012