Economy of Luxembourg

Economy of Luxembourg
Currency 1 Euro (€1) = 100 eurocent
Calendar year
Trade organisations
 EU, WTO and OECD
Statistics
GDP Increase$42.19 billion (2012 est.)
GDP rank 103rd (PPP, 2012 est.)
GDP growth
 Decrease1.0% (Real, 2012 est.)
GDP per capita
 Decrease$80,700 (PPP, 2012 est.)
GDP by sector
 agriculture: 0.4%; industry: 13.6%; services: 86% (2007 est.)
Decrease2.5% (CPI, 2012 est.)
26 (2005)
Labour force
 368,400 of whom 154,900 are foreign cross-border workers commuting primarily from France, Belgium, and Germany (2011)[1]
Labour force by occupation
 agriculture: 2.2%; industry: 17.2%; services: 80.6% (2007 est.)
Unemployment Increase6.0% (2012 est.)
Average gross salary
 €4,051/$5,469, monthly (2006)[2]
Average net salary
 2,693 € / 3,636 $, monthly (2006)[2]
Main industries
 banking and financial services, iron and steel, information technology, telecommunications, cargo transportation, food processing, chemicals, metal products, engineering, tires, glass, aluminum, tourism
56th[3]
External
Exports Decrease$15.5 billion (2012 est.)
Export goods
 machinery and equipment, steel products, chemicals, rubber products, glass
Main export partners
  Germany 21.6%
 France 15.5%
 Belgium 14.5%
 United Kingdom 5.8%
 Italy 5.6%
  Switzerland 4.7% (2012 est.)[4]
Imports Decrease$25.08 billion (2012 est.)
Import goods
 Minerals, metals, foodstuffs, quality consumer goods
Main import partners
  Belgium 30.9%
 Germany 23.4%
 France 10.4%
 United States 8.2%
 China 7.2%
 Netherlands 5.1% (2012 est.)[5]
FDI stock
 $11.21 billion (31 December 2008 est.)
Increase$2.146 trillion (30 June 2011)
Public finances
Increase18.4% of GDP (2012 est.)
Revenues $23.05 billion (2012 est.)
Expenses $23.56 billion (2012 est.)
Economic aid donor: ODA, $235.59 million (2004)
  • Standard & Poor's:[6]
    AAA (Domestic)
    AAA (Foreign)
    AAA (T&C Assessment)
    Outlook: Stable[7]
  • Moody's:[7]
    Aaa
    Outlook: Stable
  • Fitch:[7]
    AAA
    Outlook: Positive
Foreign reserves
 Increase$1.014 billion (31 December 2011)
Main data source: CIA World Fact Book
All values, unless otherwise stated, are in US dollars.
The labour productivity level of Luxembourg is one of highest in Europe. OECD, 2012

The economy of Luxembourg is largely dependent on the banking, steel, and industrial sectors. Luxembourgers enjoy the second highest per capita gross domestic product in the world (CIA 2007 est.), behind Qatar. Luxembourg is seen as a diversified industrialized nation, contrasting the oil boom in Qatar, the major monetary source of that nation.

Although Luxembourg in tourist literature is aptly called the "Green Heart of Europe", its pastoral land coexists with a highly industrialized and export-intensive economy. Luxembourg enjoys a degree of economic prosperity almost unique among industrialized democracies.

In 2009, a budget deficit of 5% resulted from government measures to stimulate the economy, especially the banking sector, as a result of the world economic crisis. This was however reduced to 1.4% in 2010.[8]

Sectors

In 2013 the GDP was $60.54 billion of which services, including the financial sector, produced 86%. The financial sector comprised 36% of GDP, industry comprised 13.3% and agriculture only 0.3%.[9]

Banking

Luxembourg has been part of the eurozone since 1999.

Banking is the largest sector in the Luxembourg economy. The country has specialised in the cross-border fund administration business. As Luxembourg's domestic market is relatively small, the country's financial centre is predominantly international. At the end of March 2009, there were 152 banks in Luxembourg, with over 27,000 employees. Political stability, good communications, easy access to other European centres, skilled multilingual staff, a tradition of banking secrecy and cross-border financial expertise have all contributed to the growth of the financial sector. These factors have contributed to a Corruption Perceptions Index of 8.3 and a DAW Index ranking of 10 in 2012; the latter the highest in Europe.[10] Germany accounts for the largest-single grouping of banks, with Scandinavian, Japanese, and major US banks also heavily represented. Total assets exceeded €929 billion at the end of 2008. More than 9,000 holding companies are established in Luxembourg. The European Investment Bank—the financial institution of the European Union—is also located there.

Concern about Luxembourg's banking secrecy laws, and its reputation as a tax haven, led in April 2009 to it being added to a "grey list" of nations with questionable banking arrangements by the G20 , a list from which it was removed in 2009.[11] This concern has led Luxembourg to modify its tax legislation to avoid conflict with the tax authorities of European Union Members. For example, the classic tax exempt 1929 Holding Company was outlawed 31 December 2010, as it was deemed an illegal state aid by the European Commission.[12]

Steel

A key event in the economic history of Luxembourg was the 1876 introduction of English metallurgy. The refining process led to the development of the steel industry in Luxembourg and founding of the Arbed company in 1911.

The iron and steel industry, located along the French border, is an important sector of the economy. Steel accounts for 29% of all exports (excluding services), 1.8% of GDP, 22% of industrial employment, and 3.9% of the work force.

The restructuring of the industry and increasing government ownership in Arbed (31%) began as early as 1974. As a result of timely modernization of facilities, cutbacks in production and employment, government assumption of portions of Arbed's debt, and recent cyclical recovery of the international demand for steel, the company is again profitable. Its productivity is among the highest in the world. US markets account for about 6% of Arbed's output. The company specializes in production of large architectural steel beams and specialized value-added products. There has been, however, a relative decline in the steel sector, offset by Luxembourg's emergence as a financial center. In 2001, through the merger with Aceralia and Usinor, Arbed became Arcelor. Arcelor was taken over in 2006 by Mittal Steel to form Arcelor-Mittal, helmed by Lakshmi Mittal, the largest steel producer in the world.

Telecommunications

Government policies promote the development of Luxembourg as an audiovisual and communications center. Radio-Television-Luxembourg is Europe's premier private radio and television broadcaster. The government-backed Luxembourg satellite company "Société européenne des satellites" (SES) was created in 1986 to install and operate a satellite telecommunications system for transmission of television programs throughout Europe. The first SES Astra satellite, the 16-channel RCA 4000 Astra 1A, was launched by the Ariane Rocket in December 1988. SES presently constitutes the world largest satellite services company in terms of revenue.

Tourism

Main article: Tourism in Luxembourg

Tourism is an important component of the national economy, representing about 8.3% of GDP in 2009 and employing some 25,000 people or 11.7% of the working population.[13] Despite the current crisis, the Grand Duchy still welcomes over 900,000 visitors a year who spend an average of 2.5 nights in hotels, hostels or on camping sites.[14] Business travel is flourishing representing 44% of overnight stays in the country and 60% in the capital, up 11% and 25% between 2009 and 2010.[15]

Agriculture

Luxembourg's small but productive agricultural sector is highly subsidized, mainly by the EU and the government. It employs about 1–3% of the work force. Most farmers are engaged in dairy and meat production. Vineyards in the Moselle Valley annually produce about 15 million litres of dry white wine, most of which is consumed within Luxembourg and also in Germany, France, and Belgium on a lesser scale.

Accounting principles

Establishing accounts depends on the size of companies, and referring to three criteria: total of the balance sheet (total of assets without losses of the accounting year), the net amount of the turnover (net, such as it appears on the profit and loss account) and the average number of the workforce.

The control of medium and big companies must be made by one or several independent auditors of companies, appointed by the general assembly among the members of the Institute of Independent Auditors of Companies. The control of small companies must be made by an accountant appointed by the general assembly for definite duration. The conclusion of the independent auditor’s report can be: – A certificate without reserve, that is to say an approval – A certificate with reserves, that is to say that there is approval with reserves because of discords or doubts. – A refusal to give a certificate.

The accountants’ associations have difficulties to get organized because of the importance of the State in the accounting system.

Labour relations

Labour relations have been peaceful since the 1930s. Most industrial workers are organized by unions linked to one of the major political parties. Representatives of business, unions, and government participate in the conduct of major labour negotiations.

Foreign investors often cite Luxembourg's labour relations as a primary reason for locating in the Grand Duchy. Unemployment in 1999 averaged less than 2.8% of the workforce, but reached 4.4% by 2007.

Energy

In 1978, Luxembourg tried to build a 1,200 MW nuclear reactor but dropped the plans after threats of major protests.[16] Currently, Luxembourg uses imported oil and natural gas for the majority of its energy generation.[17]

Transportation

Luxembourg has efficient road, rail and air transport facilities and services. The road network has been significantly modernised in recent years with 147 km of motorways connecting the capital to adjacent countries. The advent of the high-speed TGV link to Paris has led to renovation of the city's railway station while a new passenger terminal at Luxembourg Airport has recently been opened. There are plans to introduce trams in the capital and light-rail lines in adjacent areas within the next few years.

Prospects

According to a note from the Luxembourg statistical agency, the Luxembourg economy was set to grow 4.0% in 2011. The economic situation was particularly dynamic in late 2010 and early 2011 but there were signs of a slowdown, both in the international economic environment and in terms of national indicators.[18] GDP growth is set to enter a recession in 2012.[19]

See also

References

  1. ↑ Statec Employment
  2. ↑ 2.0 2.1 Wages and Taxes for the Average Joe in the EU 2
  3. ↑ "Doing Business in Luxembourg 2013". World Bank. Retrieved 23 October 2012.
  4. ↑ "Export Partners of Luxembourg". CIA World Factbook. 2012. Retrieved 24 July 2013.
  5. ↑ "Import Partners of Luxembourg". CIA World Factbook. 2012. Retrieved 24 July 2013.
  6. ↑ "Sovereigns rating list". Standard & Poor's. Retrieved 26 May 2011.
  7. ↑ 7.0 7.1 7.2 Rogers, Simon; Sedghi, Ami (15 April 2011). "How Fitch, Moody's and S&P rate each country's credit rating". The Guardian. Retrieved 31 May 2011.
  8. ↑ "Luxembourg", CIA – The World Fact Book. Retrieved 8 September 2011.
  9. ↑ "The World Factbook". Central Intelligence Agency. 2014-06-20. Retrieved 16 November 2014.
  10. ↑ Transparency International, 2008
  11. ↑ European voice http://www.europeanvoice.com/article/imported/luxembourg-and-belgium-removed-from-grey-list-/65629.aspx. Missing or empty |title= (help)
  12. ↑ Luxembourg Company Registration Healy Consultants Retrieved 3 September 2013.
  13. ↑ "Lux is the place to be for business travellers", News 352, 10 February 2011. Retrieved 14 February 2011.
  14. ↑ "Bulletin du Statec n°6-2010". (French) Retrieved 14 February 2011.
  15. ↑ "La saison touristique 2010 : une stabilisation à bas niveau", Ministère des Classes moyennes et du Tourisme. (French) Retrieved 14 February 2011.
  16. ↑ "Reactors." Wise – Nuclear issues information services. July 1978. <http://www10.antenna.nl/wise/index.html?http://www10.antenna.nl/wise/b2/reactors.html>
  17. ↑ “LUXEMBOURG – Energy Mix Fact Sheet.” Europa. January 2007. http://ec.europa.eu/energy/energy_policy/doc/factsheets/mix/mix_lu_en.pdf
  18. ↑ "Business and Economy", Embassy of Luxembourg in Washington. Retrieved 8 September 2011.
  19. ↑ "Growth in 2012", Which economies will grow and shrink the fastest in 2012?. The Economist online 4 January 2012.

External links