Luxembourg: GDP set to contract

The international crisis hit the economy towards the end of 2008. Initially, the financial sector was affected, but the collapse in world trade also hurt the export-dependent manufacturing sector, and GDP is set to contract during 2009.

Subsequently, a mild recovery will emerge on the back of fiscal stimulus, easier monetary conditions and a pickup in world trade.

Despite the waning of the international financial turbulence, the main uncertainty in these projections remains the duration and severity of the worldwide downturn. Another uncertainty is whether the manufacturing sector can maintain its position as a subcontractor to the German automobile industry in face of the worldwide restructuring of this sector. The government is implementing a fiscal stimulus of more than 3% of GDP. To secure fiscal sustainability, this stimulus should be withdrawn as soon as the strength of the recovery allows.

Click here to see all OECD Observer articles on Luxembourg

See also www.oecd.org/luxembourg

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©OECD Observer No 274, July 2009




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