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The Luxembourg Chamber of Commerce criticises the state budget for overly optimistic economic growth projections amid global crises and warns of unsustainably high government spending.
Luxembourg is facing a growth breakdown, the Chamber of Commerce finds in its official opinion on the state budget. According to the institution, the budget is optimistic in its assumption that the economy will grow by 2% this year, particularly due to the various international crises unfolding at present.
The body further warns that spending is increasing too quickly in comparison to revenue growth. In regard to this, chamber director Carlo Thelen points out that the central government's spending this year is 1.1 percentage points above the historic average of the close to 25 last years.
Thelen elaborates: "This is because of incompressible spending, as we call it, which is rigorous. This notably includes salary costs. They made up 7.35% of the 2022 GDP and are projected to grow to 8.54% of the 2027 GDP, and, as already mentioned, they went up by €7 billion in recent years. This is enormous."
The chamber president went on to argue that the government might be able to curb the spending rate by increasing its digitalisation efforts and simplifying administrative regulations so that fewer employees are needed.
To stimulate revenue, the chamber proposes to improve economic competitiveness by rendering the taxation system more favourable. The body further pleads for structural reforms, citing the pension system as one example.
