Luxembourg: Financial resilience
Growth was well above that in other European economies in 2007. Largely unaffected by the turmoil on international markets due to its strong position in the mutual funds sector, financial services continued to be the main driver of economic growth. Strong private investment and manufacturing exports also contributed to the expansion. The improved employment prospects spread from cross-border workers to residents, enabling a gradual reduction in the unemployment rate. Despite a loss in price competitiveness, the recovery is set to weaken only moderately and growth is likely to remain above potential growth through to 2009.
For a balanced pattern of growth, labour force participation should be stimulated further, so as to increase employment growth among residents. With output growing above potential, fiscal consolidation should concentrate on further expenditure restraint.
No. 264/265, December 2007-January 2008
• OECD Economic Outlook No. 82, December 2007
• Visit www.oecd.org/luxembourg
• All OECD Observer articles on Luxembourg