During the second half of the 20th century, the Grand Duchy achieved one of the best economic performances in Europe.
From the mid-1980s until 2000, the average growth rate of GDP reached a level never experienced in the Grand Duchy over such a long period of time — more than 5% per year.
The principal factors at the origin of this exceptional development have been:
- the continuous growth of the financial sector;
- the favourable development of other economic sectors, such as business services, IT services, transport and communications;
- a productive and competitive industrial sector, although its relative part in GDP is now diminishing;
- a high and growing level of investment;
- relatively low wage deductions (payroll taxes, social security contributions), keeping the cost of labour at a competitive level;
- a falling level of statutory contributions and charges and public expenditure (as a percentage of GDP) over the same period.
When the economies of its major trading partners began to slow down in 2001, the Grand Duchy's economy followed suit. In 2002, growth in the added value of the financial services became positive again. However, the financial sector experienced a relapse in 2003 before achieving substantial increases in 2004 and 2005.
The rate of GDP growth reflected this evolution with a marked slowdown at the beginning of the decade, at 2.5% in 2001, 3.8% in 2002 and 1.3% in 2003, followed by a significant stimulus that resulted in growth of 4.5% in 2004, 4.0% in 2005 and as much as 6.1% in 2006.
With the financial crisis of autumn 2008, the Luxembourg economy experienced a sharp slowdown.
In November 2014, Statec noted in its 'Note de Conjoncture' No. 2/2014: 'The Grand Duchy is heading towards growth close to 3% for this year thanks to a first half-year of dynamic economic activity. The economic horizon darkened, however, as summer approached, revealing a European environment that was less buoyant than expected. Growth in GDP is therefore likely to be reduced to about 2% in 2015.'