Luxembourg is set to face important financial challenges if the spreading of the coronavirus continues.

The northern regions of Italy are currently paralysed, China`s workforce is at half speed, and sports events are being cancelled in several countries. As the wider cultural impacts of the coronavirus become more and more visible, Luxembourg`s economy will have to adjust as well if the spreading continues. According to a Statec press release from 9 March, the emergence and spreading of the disease has already left its mark on a struggling global economy.

First country affected? China, the birth place of the virus. Although a major agent in the global economy, China has only limited direct ties with the Grand-Duchy, according to Statec.

However, as great parts of Chinese production and supply are being slowed down, both the global economy and Luxembourg`s partners will suffer from certain consequences. "First of all, one has to consider the case of Germany, Luxembourg`s most immediate trading partner, who had already suffered from a decrease in demand from China due to the ongoing trade war with the United States." The wider impacts of the virus on Luxembourg`s neighbouring countries, as well as the Grand-Duchy itself, are yet to be determined.

IF THE SITUATION WERE TO BECOME MORE SEVERE, ECONOMIC GROWTH WOULD STALL

Although too early to determine the exact impacts of the virus on everyday life, the alterations of the financial markets already pose challenges. According to Statec, the welfare of the stock market is of crucial importance to Luxembourg`s economy, as it directly conditions the performance of the financial sector. "In this aspect, disengagement within the financial sector has already had observable consequences."

The simulation undertaken by Statec, which takes the slowing down of the euro zone into consideration, sees the growth of the GDP come to a full stop - if the sitation becomes more dire. With a continued spreading of the virus, the growth rate of the job market is set to decrease from 2.5% to 2%, and further shocks on the Grand-Duchy`s economy should be expected.