The Luxembourg economy shows tentative signs of recovery, despite not being in peak condition, according to the National Institute of Statistics and Economic Studies (STATEC). This was the general assessment presented in its second economic outlook for 2025.
While US tariffs have negatively impacted both sides, a full-scale trade war has been averted. This context supports a modest recovery for Luxembourg, with projected GDP growth of 1% in 2025, 1.7% in 2026, and 2.1% in 2027.
“This is a situation still far removed from what was seen in the 2010s”, explained Tom Haas, Director of STATEC. He noted that Luxembourg is transitioning from an exceptional status to that of a “normal country”, aligning its economic trajectory with surrounding European nations.
Inflation is forecast at 2.5% for 2025 – slightly above the eurozone average – but is expected to decline next year as electricity prices fall. STATEC anticipates the next wage indexation will occur in the third quarter of 2026.
Employment is set to grow modestly over the next two years, following a 1% increase this year. Concurrently, unemployment is projected to dip by 0.1% to 5.8% in 2026.
Regarding public finances, STATEC reports that 2025 revenues have declined, partly due to government recovery measures. The forthcoming pension reform is expected to boost revenues from 2026 onward, generating an additional €370 million.
Conversely, public spending remains high. Recent factors include a new salary agreement for the civil service and major investments such as a new military satellite and projects by the Luxembourg National Railway Company (CFL). As a result, the public balance is forecast at -0.1% of GDP in 2025, worsening to -1% by 2027.
