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法國
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義大利
美國Dampened economic outlook
Luxembourg’s economy continued its moderate recovery in 2025, following several subdued years, supported primarily by a rebound in financial sector activity and a renewed increase in exports of financial services. The financial sector remains the backbone of the Luxembourg economy, consistently accounting for around 30% of GDP, and developments in this sector are therefore central to the overall economic outlook. Looking ahead, growth in financial activities is expected to soften somewhat in 2026 and 2027. Heightened global uncertainty and the prospect of a higher?for?longer interest?rate environment are likely to weigh on market sentiment and asset valuations. In particular, volatility in European equity markets –important to Luxembourg’s fund management and related financial activities – is expected to increase, especially in 2026, which could dampen growth in financial services and impact the wider economy.
In 2026 and 2027, Luxembourg’s growth is expected to rely more on public demand, with government spending compensating for softer momentum elsewhere in the economy. Continued public expenditure should provide an important stabilising force as private?sector activity slows amid a more uncertain global environment. Household consumption is expected to remain supported by the automatic indexation of wages, pensions and benefits, which helps preserve purchasing power. However, elevated uncertainty and higher energy prices are likely to weigh on confidence, limiting the strength of consumption growth. Inflation is projected to rise again during 2026, driven by higher energy prices linked to the war and by second?round effects on services and wages. Price pressures are expected to gradually ease in 2027 as energy?related effects fade, although disinflation is likely to be gradual. Investment growth is expected to weaken over the forecast horizon, as heightened geopolitical uncertainty and persistently higher interest rates weigh on sentiment and financing conditions.
The external environment is expected to remain challenging over the forecast horizon. Global trade is likely to be weighed down by the war, which continues to dampen international demand and disrupt trade flows. While uncertainty surrounding US–EU trade relations has eased somewhat compared with 2025, a residual negative impact from tariffs and trade frictions is still expected in 2026 and 2027. Luxembourg’s export structure – dominated by services – offers some insulation, with financial services accounting for around 45% of total exports and other services a further 43%. However, weaker demand from key European partners is likely to limit export growth, leaving external demand a modest contributor to overall economic activity.
Broadly stable external and fiscal positions
Luxembourg’s external and fiscal positions are expected to remain broadly stable in 2026 and 2027. The current account surplus is forecast to remain close to 5% of GDP in both years, underpinned by a persistently strong services balance. Financial services continue to dominate the export structure and remain the key source of external surplus, reflecting Luxembourg’s role as a global financial centre. While goods trade remains in deficit, this is more than offset by sizeable surpluses in financial and other business?related services. Some volatility in external balances cannot be excluded given market?driven financial flows, but the overall current account position is expected to remain structurally positive over the forecast horizon.
On the fiscal side, the public deficit is expected to stabilise at around 1% of GDP in both 2026 and 2027. Government spending is set to rise, reflecting ongoing commitments to energy?related support measures, defence, wage and pension indexation and broader social and infrastructure expenditure. At the same time, revenue growth should benefit from some growth in consumption and higher social contributions, helping to prevent any further material widening of the deficit. Public debt is therefore projected to rise slightly from its currently low levels, but to remain comfortably below euro?area averages. Even under this trajectory, Luxembourg is expected to maintain a strong fiscal position, with ample policy space relative to most European peers.
Stable governance in Luxembourg
Prime Minister Luc Frieden continues to lead a centre?right coalition between the Christian Social People’s Party (CSV) and the liberal Democratic Party (DP), in place since the 2023 election. The coalition has so far proven cohesive, although a cabinet reshuffle in December 2025 – triggered by the resignation of the labour and sport minister following internal disagreements – highlighted some underlying tensions. Nevertheless, political stability remains strong, and the government is expected to remain in office until the next elections in 2028. While the CSV remains the largest party, recent polling indicates declining support, with the DP and LSAP gaining ground. Although these trends do not pose an immediate threat to the coalition, they might suggest a more fragmented political environment at the next election.
The 2026 budget, presented in October 2025 and adopted in December, maintains cost?of?living support and introduces additional social measures, including energy?related support, while higher defence spending and a rising public wage bill keep the fiscal deficit elevated but within EU limits. At the same time, the government has demonstrated solid implementation capacity, with the budget approved by the governing majority. Key measures include an increase in pension contribution rates from 24% to 25.5% and targeted tax incentives aimed at supporting private investment, particularly in younger firms. The budget places a strong emphasis on growth and social cohesion, with “record investment” across sectors, notably housing, which accounts for a large share of tax expenditure. However, opposition parties have criticised the plan for lacking clarity on funding and postponing longer?term fiscal challenges. Overall, fiscal policy continues to prioritise income protection and confidence amid a complex macroeconomic environment, alongside rising defence commitments.