Luxembourg: Financial services exposure
The economy has been hit severely by the international financial crisis through its exposure to financial services and trade. The number of people on active labour market programmes has risen. However, the fall in output has been partially absorbed by an increase in the number of workers on reduced work time, from near zero before the crisis to 2.8% of the labour force in August. There are signs that activity has bottomed out, however, thanks to stronger equity markets and policy support. Further ahead, gradual recovery will be sustained by improving financial conditions and growth in world trade.
Further fiscal stimulus of around 1.5% of GDP has been put in place for 2010. The authorities should lay out a credible path for medium-term fiscal consolidation. Luxembourg remains highly exposed to uncertainty about international financial conditions and the improvement in world trade. The main uncertainty, however, is about the impact of the financial crisis on potential output and the long-term prospects of the economy, given its narrow specialisation in certain financial activities and types of industrial production.
©OECD Observer 2010