In its latest Economic Survey of Luxembourg, the OECD analyses the factors that explain the soundness of the country's economic performance and the public policies that can make growth greener and more resilient. The study also focuses on the diversification of the Luxembourg economy, the immigration factor and the labour market, thus giving a fairly general overview of Luxembourg's economic performance.
Very sound economic performance
According to the OECD, Luxembourg’s economic performance is very strong, thanks to the dynamic services sector, business-friendly regulations, predictable tax system, sound fiscal policies and openness to global talent.
Indeed, Luxembourg remains the country with the highest per capita income of the OECD, thanks to the dynamism of the services sector, in particular banking and financial services.
As regards the financial sector in particular, the OECD highlights the high degree of development of the financial centre and the existence of satisfactory supervision. However, in view of the sector's high weight compared to the rest of the Luxembourg economy, the OECD recommends developing the capacity to carry out regular system-wide stress tests for the links between funds and banks in an effort to promote more resilient growth.
The third industrial revolution will change the country
However, the report also stresses the need for the economy to reduce its dependence on the financial sector. Thus, the OECD praises the government strategy "for a third industrial revolution", centred around the new digital technologies and renewable energies. This strategy should enable Luxembourg to lead the way in these two sectors by making the whole country a real centre of expertise in new technologies.
An open, outward looking economy
Foreign investment is motivated by business-friendly regulation, a stable tax system and sound macroeconomic policy. Foreign labour is attracted by the abundance of jobs and many cross-border commuters come to Luxembourg to work every day. In fact, more than 40% of jobs are occupied by non-residents and 45% of residents do not have Luxembourg nationality. Because of the high share of crossborder workers the gross national income (GNI), which excludes factor income from domestic production that accrues to non-residents, is lower than gross domestic product (GDP) by about a third.
(Article written by the editorial team of the luxembourg.lu portal - Source: OECD)