The European Commission's Spring 2025 forecast raised Luxembourg's real GDP growth forecast to 1.7% in 2025.

Luxembourg’s real GDP growth forecast for 2025 has been raised to 1.7% by the European Commission’s Spring 2025 outlook—a sign of cautious optimism as the country navigates global economic uncertainty and local pressures.

Economic Expansion Amid Global Trade Tensions
After sluggish growth of just 1% in 2024, Luxembourg is expected to see its economy pick up pace in 2025. The increase to 1.7% GDP growth comes against a backdrop of global trade tensions, especially following new US tariff hikes that have hampered export prospects in other EU countries, making Luxembourg’s relative resilience noteworthy.

Domestic Demand and Investment Lead the Way
The Commission’s report highlights that domestic demand—rather than exports—will be the main driver of Luxembourg’s 2025 growth. Improved consumer confidence, falling interest rates, and recent wage indexation are all expected to boost spending. There’s a marked recovery in residential construction and equipment investment, with increased mortgage demand pointing to strength in the housing market.

Sectoral Shifts: Health, Administration, and Construction
Growth in 2024 depended largely on human health, social work, and public administration, even as financial services and construction contracted. Looking ahead, renewed investment and government stimulus measures are predicted to offset ongoing weaknesses in key sectors, including financial services that face continued global uncertainty.

Fiscal Balances and Policy Outlook
Luxembourg posted a general government surplus in 2024 due to windfall revenues, but a deficit (-0.4% of GDP) is expected in 2025 as public spending expands to support the recovery. Inflation is projected to decrease slightly (2.1% in 2025), helping to preserve household purchasing power.

Unemployment and Public Debt
The unemployment rate is forecast to hold steady at 6.6%, while gross public debt remains comparatively low, dipping marginally to 25.7% of GDP. The government’s careful fiscal management and continued investment in social infrastructure maintain Luxembourg’s position as one of the EU’s most financially stable economies.

Outlook for Luxembourg Residents and Businesses
For Luxembourg’s citizens, these forecasts signal improving economic prospects, with rising wages, increased job stability, and investment opportunities, particularly in housing and new equipment projects. Businesses may benefit from better financing conditions and stronger domestic consumption, even as global uncertainties linger.

The Spring 2025 forecast solidifies Luxembourg’s position as a steady growth leader in the region, with proactive policies and resilient consumer demand expected to underpin economic improvement over the coming year.

Learn More : Economic forecast for Luxembourg - European Commission

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