The economy and key sectors

Economic highlights

A very open economy, high growth potential, balanced macroeconomic foundations, diversified industry, international financial centre, modern infrastructures, excellent market connectivity, attractive institutional, legislative and fiscal framework

Capital of the European Union:

Luxembourg City is one of the three 'capitals' of the European Union, along with Brussels and Strasbourg. Luxembourg City is home to a number of European departments and institutions, including several departments of the European Commission (translation, publications, statistics), the European Court of Auditors, the Court of Justice of the European Union, the European Investment Bank (EIB), the European Investment Fund (EIF), the European Parliament's Secretariat, the European Financial Stability Facility (EFSF), and the European Financial Stabilisation Mechanism (EFSM).

Founding member of major international organisations:

  • Benelux, Council of Europe
  • European Union
  • NATO
  • OECD
  • United Nations
  • WTO ...

Currency

  • 1 euro (€) = 100 cents

Employment market

Unemployment rate

  • 7,1% (March 2014)

Total domestic employment*

  • 392,131 employees (March 2014); around 70% of the country’s workforce is composed of immigrants or cross-border employees.

Frontier workers

  • incoming cross-border employees *: 162 183 (March 2014)
  • outgoing resident employees*: 11,908 (March 2014)

The ratio of cross-border employees grew from 3% in 1961 to 44% in 2010; nearly one cross-border employee in two comes from France.

International agents and officials

  • 1,400 (2012)

Inflation rate

  • 1.7% (2013)

GDP (real growth rate) **

  • 2.7% (2014)

* seasonally adjusted data
** forecast

per capita GDP

82,700 EUR in 2012. This figure makes the Grand Duchy the richest country in the world, but account should be taken of the large number of cross-border workers who by definition are not included in the equation.

Great political and social stability

Faithful to the 'Luxembourg social model', the government, employers and the trade unions get together under the 'Tripartite' scheme to discuss important social and economic matters. As a result, the annual number of days of industrial action is particularly low in the Grand Duchy.

The Grand Duchy's open attitude:

The Grand Duchy is heavily dependent on other countries, both as clients for its goods and services and as suppliers of those goods and services not available on the national market.

Information society:

in 2013, 99.4% of households had a mobile phone, 94% had a computer, 95% had access to the Internet at home, and nearly 8 households in 10 had high-speed access. Almost all businesses use computers and are connected to the Internet. 9 businesses in 10 use broadband connections. 8 businesses in 10 apply a 'green IT' policy.

Breakdown of GDP by sector of activity:

  • agriculture: 0.3%
  • industry: 13.4%
  • services: 86.8%

Important economic sectors

The financial sector is the main driving force behind the Grand Duchy's economy. Even so, the Grand Duchy's authorities are aware of the risk of the economy being over-dependent on any one sector, and have adopted a policy of diversification of the country's economic fabric by providing support for information and communication technologies (ICTs), logistics, bio- and eco-technologies, research, etc. as well as actively promoting the diversification of the financial marketplace.

Finance 

The Grand Duchy is a first rate financial marketplace. Some 150 banks (2014) operate out of the Grand Duchy. Luxembourg is the leading centre in Europe for investment funds (in second place worldwide, after the USA), the leading centre for private banking in the Eurozone, and the domicile of choice for reinsurance companies. Luxembourg for Finance (LFF) is the country's agency for the development and promotion of the financial marketplace. The banks located in the Grand Duchy specialise in private banking (wealth management for private clients), insurance, the functions of custodian bank for investment funds and fund administration, and in the distribution of shares in invetment funds. The activities of the financial marketplace are also diversifying into the fields of microfinance, philanthropy and Islamic finance. The financial sector creates one-third of the Grand Duchy's GDP.

  • For more information, please read our 'Finance' pages.

Information and communication technologies (ICT) 

The ICT sector provides 6.6% of total gross added value (figure for 2012). The ICT sector's share of total employment is 4.0% (figure for 2012). Multiple very high-speed direct connections lead from the Grand Duchy to the main European hubs. The time lag between the Grand Duchy and London, Amsterdam, Frankfurt, Paris, etc. is extremely short. The Grand Duchy hosts some of the 'stars' of the ICT sector, including Amazon, iTunes, eBay, Vodafone, RealNetworks, Rakuten, etc., as well as a number of online video game companies. Some of the Grand Duchy's other advantages:

  • Great diversity of very high level data centres
  • Low cost of electricity
  • Broadband Internet coverage: 100% (2014)
  • Penetration rate of mobile broadband Internet: 65% (based on mobile telephone users, 2012)
  • Fixed-line broadband Internet coverage at 100 Mbps: 80% (based on population, 2014)
  • Fixed-line broadband Internet coverage at 1 Gbps: 25% (based on population, 2014)
  • Number of certified Tier IV data centres in the Grand Duchy: 6 (2014)

The Grand Duchy is the leading country in Europe for broadband Internet coverage (2014) and international internet bandwidth (2014). It is also the leading country (among 148) for legislation on ICTs (2014). The Grand Duchy's ICT Cluster oversees the whole sector.

  • For more information, please read our 'E-commerce' pages.

Logistics

Logistics: Taking advantage of excellent connectivity to international markets, the Grand Duchy's logistics sector is surging ahead. It is based on three mainstays: air freight with Cargolux, one of the largest air freight companies in the world, LuxairCargo and CargoCenter, rail freight with CFL Cargo and CFL Multimodal, and river freight; Luxembourg Freeport, the first free zone of the Grand Duchy of Luxembourg at Findel International Airport; Pharma & Healthcare Center at Findel International Airport; Pharma & Healthcare Centre at Findel international airport; 'Cluster for Logistics' overseeing the whole sector. According to the World Bank's Logistics Performance Index (LPI), the Grand Duchy stands in 8th position of the countries with the best performance in logistics (2014).

  • For more information, please read our 'Logistics' pages.

Biotechnology

The University of Luxembourg and the publicly funded research centres are collaborating with a number of internationally renowned research institutions on three projects: a bio-bank, the Integrated Biobank of Luxembourg (IBBL), the Luxembourg Centre for Systems Biomedicine, and research in the field of validating markers for lung cancer. The Luxembourg BioHealth Cluster oversees the whole sector.

Eco-technologies

The Grand Duchy hosts about 200 eco-industries working in the fields of renewable sources of energy, waste management, water and eco-construction. They are supported in their work by 28 public-sector agencies and six research institutes. The Luxembourg Ecoinnovation Cluster oversees the whole sector.

Industry

For many years, the iron and steel industry was the driving force behind the Grand Duchy's economy, until the crisis in the industry in the 1970s. ARBED's name is directly connected with the country's wealth. ARBED's merger in 2001 with Usinor and Aceralia produced ARCELOR, which in turn merged with Mittal Steel in 2006. ArcelorMittal, whose headquarters are in Luxembourg City, is currently the world's largest steel group. Other industrial sectors materials (DuPont de Nemours, Guardian Glass, etc.) and fittings for the motor vehicle industry (Goodyear, Delphi, etc.)

  • For more information, please read our 'Industry' pages .

Audiovisual production

The Grand Duchy played a pioneering role on the European media scene. Two media and communications giants came into being in Luxembourg and are still continuing to expand from their HQ in the Grand Duchy: the RTL group, the leading radio and television broadcaster in Europe, and SES, the world's leading provider of communication and broadcasting services, with a fleet of about fifty satellites. There are also about twenty film production companies, three film studios, and about thirty post-production companies in the Grand Duchy. A good number of Luxembourgish (co-)productions have won awards at international film festivals. In 2014, the Grand Duchy won its first Oscar, for the animated film Mr Hublot (Zeilt Productions). In 2013, the animated film Ernest et Célestine (Mélusine Productions) won, among other awards, the César for the best animated film.

Research and innovation

Research and innovation are key elements in the policy to diversify the Grand Duchy's economy. In 2014, 1,24% of the Grand Duchy's GDP was devoted to research. Un peu plus que la moitié des dépenses de recherche émane du secteur privé. The government has set a national target of 2.6% of GDP for spending on research and development (R&D). The University of Luxembourg, created in 2003, is a new, multilingual university focusing on research. It is located at the centre of the City of Science, Research and Innovation on the ancient industrial site of Esch-Belval as well as the House of Innovation and several public research bodies: LISER (Luxembourg Institute of Socio-Economic Research), LIST (Luxembourg Institute of Science and Technology), LCSB (Luxembourg Centre for Systems Biomedicine)...

Crafts

Crafts: This sector, with some 7,000 businesses, is the leading employer in the Grand Duchy. In relation to the economy as a whole, the crafts sector represents 22% of businesses and 23% of total employment (2017 figures). The sector is heavily dependent on cross-border labour (49%). 

Tourism

Tourism: The World Tourism & Travel Council (WTTC) calculated the direct and indirect impact of tourism as representing 5.7% of the Grand Duchy's GDP (2012). The tourism sector represents 7.6% of total employment. The government pays particular attention to business and congress tourism (MICE). Tourism in the Grand Duchy is promoted by the National Tourist Board (Office national du tourisme, ONT).

Agriculture

Agriculture's contribution to the national economy has been stable in recent years, but at a very low level. Whereas in 1947 43.7% of the population of the Grand Duchy worked in the primary sector (agriculture, hunting, forestry, fishing), the figure has dropped considerably since, falling to 3.61% in 2001. Today, the number of farms and jobs in farming (1% of total employment in 2012) is declining, although the total area used for agricultural purposes remains more or less stable. Organic production is increasing (120 producers in 2013), albeit slowly. Demand for organic products continues to rise, however, in both specialist shops and supermarkets.

  • Updated 11-05-2017