The national statistics agency Statec expects 2026 to be a year of moderate economic recovery, with inflation and unemployment falling. The second half of last year offset earlier negative trends, and a new index tranche to be triggered in the summer, according to Statec Director Tom Haas, who spoke in an RTL interview on Monday morning.
Haas said economic growth of 1.7% is forecast for this year. While this would mark an improvement over the previous three years, it still falls short of the 3% growth seen in earlier decades. He attributed the slower pace to structural issues and demographic shifts, and warned that a return to 3% growth would be difficult. For 2027, Statec expects growth to exceed 2%.
Risks from US policy and markets
While stock markets have performed unexpectedly well so far this year, Haas warned that the potential reintroduction of US tariffs would have a negative impact, even if partially offset by trade agreements with the European Union or other partners. The question, he said, is not whether there will be an impact but rather how large the impact will be.
Given ongoing global uncertainty, Statec produces multiple scenarios for economic development, including more pessimistic ones. Haas noted that these could become reality if confidence in US economic and political stability were to falter, leading to weaker stock market performance.
However, he also pointed to positive signals, such as falling interest rates, which could help improve consumption patterns.
“90% of professions will be affected by AI”
Alongside economic growth, employment is also expected to rise again. This positive trend has already been visible in recent months. With increased labour market activity, the unemployment rate could be stabilised. Statec projects a decrease from the current 6% to 5.8% this year, followed by 5.7% in 2027.
Artificial intelligence is also expected to play a growing role in shaping the job market. A recent study by Statec indicates that 90% of professions will be affected by AI. In the majority of cases (55%) AI is expected to assist workers, having a positive impact overall. However, the study also warns that up to 15% of tasks could be automated, which could slow employment growth. As Haas noted, AI has two sides to its coin.
Public finances and fiscal reform
Asked whether the current CSV-DP coalition was staying within its financial means, the Statec director answered as follows: The state’s budgetary position remains closely tied to the performance of the broader economy. However, just like the past few years, strong revenues can still be achieved in the short term, even amid weaker growth, Haas said. But the long-term and structural outlook points to lower growth and the need for adjustments. Without reforms, structurally weaker growth would evidently lead to a decline in tax revenues.
Haas also said the real impact would depend on whether structural changes were implemented. Finance Minister Gilles Roth is expected to announce a tax individualisation reform on Tuesday. The measure is projected to cost around €1 billion per year. However, Haas noted that around €350 to €400 million in new revenue could be generated through the planned pension reform, primarily via increased contributions.
Falling inflation and indexation
According to Haas, inflation is expected to fall to 1.5% in 2026, down from an average of just over 2% last year and a year-end rate of 3%. Government subsidies for energy es have contributed to the decline. In the medium term, Haas said inflation in Luxembourg is expected to settle at around 2% – in line with the European Central Bank’s (ECB) target. In a positive assessment, Haas said he believes the ECB has managed to get to grips with high inflation.
Under the country’s automatic wage indexation mechanism, a new index tranche is projected for the summer, i.e. the third quarter.
