August 16, 2019 A robust economy, but challenges to be solved

LUXEMBOURG - OECD Secretary-General Angel Gurria on Wednesday presented his institution's study on Luxembourg's economic prospects.

Luxembourg's economy is still doing well, and the country has "the gold medal in many areas!" The Secretary-General of the Organization for Economic Co-operation and Development (OECD), the Spaniard Angel Gurria, presented the Luxembourg study on the Grand Duchy in Luxembourg on Wednesday. The macroeconomic data are satisfactory, in an uncertain global context, because of Brexit's ups and downs and trade tensions. The OECD expects growth of 2% this year and 2.5% in 2020, significantly less than the 3% expected by Statec.

Beyond the risk of slowing growth, Luxembourg must expect to face several challenges, "above all productivity and housing," says Angel Gurria. "Productivity remains high, but its growth is low, it even tends to zero," he says. According to him, "companies have a really high productivity, but the gap between different companies is increasing". It is especially in services that the rise in productivity would be disappointing.

Towards a tax reform of magnitude
As for housing, Angel Gurria believes that Luxembourg pays "its attractiveness and quality of life". He deplores the fact that "many land is not used for housing construction", because of too rigid standards or lack of fiscal incentives, for example with vacant land that is not well taxed. "Although 70% of residents are homeowners, too many households spend too much of their income on housing," he says. The OECD report also points to the aging of the population, which "threatens long-term fiscal sustainability". The country will have to "either lower the retirement age or reduce the generosity of pensions".