Luxembourg Economy


Luxembourg is one of the most highly developed industrial and service societies in the EU and one of the richest countries in the world. The gross national income (GNI) of (2017) US $ 70,260 per resident is one of the highest in the world. Luxembourg forms the Belgian-Luxembourg Economic Union (UEBL) with Belgium.

In recent decades, economic policy has succeeded in restoring the former strength of the Luxembourg economy, which was lost in the 1970s as a result of the two global “oil crises”. Thanks to the settlement of new companies from the field of information and communication technology as well as the media and a structural policy, particularly in favor of the financial services sector, the dependence on heavy industry could be overcome. The annual growth rate of the gross domestic product(GDP) averaged 1.6% between 2001 and 2010, a decline was recorded in 2012 and 2015, from 2016 GDP rose again annually, in 2017 by 2.3%. The inflation rate was 2.1% in 2017, the unemployment rate 5.8% and fell to 4.9% in 2018. In order to remove the capacity bottlenecks on the domestic labor market, Luxembourg has to fall back on foreign workers: a total of 40.6% of the non-self-employed are foreign workers (mainly cross-border commuters from France, Belgium and Germany).

External trade: Since the establishment of the economic union between Luxembourg and Belgium, a considerable part of the imports from third countries destined for the Grand Duchy have been transacted through Belgium. The trade balance has been in deficit for years (2018: -7.9 billion US $) and can only be partially offset by income from the financial and tourism sectors. Mainly metal goods (2018: 13.5% of the export value), machines (13.3%), plastic and rubber products, as well as food and beverages are exported. The main trading partners are Germany, France and Belgium.


According to smber, about half of Luxembourg’s land area is used for agriculture, another 35% is forested. In turn, 50% of the agricultural area is used for cattle breeding, which is by far the main source of income for the farmers. Cattle farming is of particular importance. Are cultivated inter alia. Barley, wheat and silage maize. Viticulture is entirely concentrated in the Moselle valley (Luxembourg wines). The number of farms has steadily declined since the 1970s, while their size increased significantly from 21 hectares to around 68 hectares.

Service sector

The steel sector has shrunk sharply since the 1980s and there has been a structural change towards services, particularly financial services, which have developed into the dominant economic sector. Services generated 86.9% of GDP (2017); four fifths of the employees are employed here. The Luxembourg banking center is one of the most important locations worldwide in the areas of asset management and administration and support for private customers. In 2017 there were 139 banks, the majority of which were branches of foreign credit institutions, including 24 German ones.

Revelations by a whistleblower in 2014 revealed that Luxembourg was granting hundreds of international companies enormous tax advantages, some of which were later judged by the courts to be illegal (lux leaks). The scandal in no way diminished the country’s attractiveness as a financial center and company headquarters. In the course of Brexit, numerous banks, financial funds and fintech companies relocated their headquarters to the Grand Duchy. Various EU authorities are also based in Luxembourg (European Court of Justice, European Court of Auditors, European Investment Bank).

Tourism: Every year around 1 million tourists visit the country, around half of them Luxembourg (city).

Natural resources

Apart from slate and lime, as well as sand and gravel, Luxembourg does not have any minable resources. The once important mining of iron ore (in the Minette district in the south of the country) was stopped in 1981.

Energy industry

The generation of electricity used to be carried out by heavy industry and was based on thermal power plants operated with blast furnace gas. The first hydropower plants were built on the Sauer and Our (1960). In 1964 the pumped storage plant in Vianden was put into operation; 2010–14 Expansion to 1,300 MW capacity. The natural gas-powered power plant in Esch (completion 2001) accounts for around 40% of the domestic electricity demand. However, Luxembourg is dependent on imports to cover its energy needs (including participation in two power plants on the Moselle). In 1972, to secure the energy supply, the connection to the natural gas pipeline network from the Netherlands was completed. The share of alternative energies is becoming increasingly important.


The industry developed late. Before the First World War, the construction of the iron-making and iron-processing industry began, which provided by far the most important part of industrial production until after the Second World War. The steel crisis in the 1970s posed serious problems for the country, as the Luxembourg steelworks were 93% dependent on exports in 1970 and 84% in 1994. Steel production, which in 1974 reached its highest level of 6.4 million t, fell to 2.09 million t in 2013. The iron and steel industry is managed by ArcelorMittal(2007 takeover of the Luxembourg-based ARCELOR SA by the Dutch-Indian Mittal Steel Company BV), the largest steel producer in the world. The Luxembourg government created a major investment program to modernize heavy industry and further diversify the industrial sector. After a state agency for industrial development had already been established in 1959, numerous new companies emerged in the 1970s, including in the plastics, chemical, pharmaceutical and metal processing industries. In addition to the steel group ArcelorMittal, the tire manufacturer Goodyear Luxembourg is the largest industrial employer.


The well-developed transport network is fully geared towards the capital. The railway network covers 275 km, electrified. The road network (2,875 km paved) consists mostly of country roads, only 152 km have been expanded to form a motorway. The car density is (201) 662 cars per 1,000 residents. The Moselle, which has been canalized since 1964, with the port of Mertert is the only navigable waterway (37.4 km in Luxembourg). The international airport Luxemburg-Findel is close to the capital. In addition to the state-owned airline LUXAIR (founded in 1948), there is the private Cargolux Airlines International SA (founded in 1970).

Luxembourg Economy