Luxembourg: 2023 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Luxembourg

International Monetary Fund

No 2023/176, IMF Staff Country Reports from International Monetary Fund

Abstract: This 2023 Article IV Consultation highlights that Luxembourg has shown resilience in the aftermath of the war in Ukraine and accelerated tightening of global financial conditions, partly helped by fiscal support. Although costly, the measures have helped temporarily keeping inflation below the levels in most euro area peers and limiting the number of wage indexations. Tighter financial conditions have started to affect the financial sector, with heterogeneity across segments. The financial sector, overall, remains resilient, though there are some pockets of vulnerabilities, especially in the real estate sector and non-bank financial institutions. Growth is expected to slow to about 1 percent in 2023, before gradually recovering to its potential percent over the medium term. Headline inflation is likely to moderate further but core inflation is expected to remain persistent. The near-term outlook is highly uncertain. Risks are tilted to the downside and stem from a deeper global slowdown, a de anchoring of inflation expectations, and systemic financial instability at the global level.

Keywords: Luxembourg economy; money market rate; policy advice; liability positions vis-a-vis nonresident; central bank of Luxembourg; Inflation; Wage indexation; Mutual funds; Loans; Energy prices; Global; Europe (search for similar items in EconPapers)
Pages: 78
Date: 2023-05-24
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