Luxembourg may be heading for recession, Statec says
Luxembourg may be heading for a recession after its GDP contracted in the second quarter of 2022 compared to the first, the country's statistics agency said, as the wider Eurozone is gearing up for a downturn of the economy.
The Grand Duchy's economic output dropped by 0.5% in the second quarter, with the industry and construction sectors dragging it down, Statec said in a report released on Tuesday.
Financial services did grow by 2.4% between April and June after contracting by 4% in the first three months of the year, but could not cushion the overall decrease in GDP, Statec said.
Growth for 2022 will now come in at just 1.7%, according to the agency, which is down from the 2.5% forecast Finance Minister Yuriko Backes gave in her presentation of the budget earlier this month.
Both Luxembourg and the wider Euro area are grappling with sky-high inflation and energy prices that are putting a damper on consumer and business confidence.
"While business activity in the euro area, which benefited from the lifting of restrictions, remained resilient in the second quarter, it fell in Luxembourg," the report says.
Luxembourg's bleak economic figures come as the wider Euro area is heading for a recession as its GDP dropped by 0.1% in the third quarter compared to the previous, Statec said, citing data by S&P Global.
“The eurozone economy looks set to contract in the fourth quarter given the steepening loss of output and deteriorating demand picture seen in October, adding to speculation that a recession is looking increasingly inevitable,” Chris Williamson, an economist at S&P Global, said on Monday in a statement.
Unemployment is also on the rise in Luxembourg, as it is in 19 other European countries, Statec said. But the increase of unemployment remains small as the rate stood at 4.8 % between August and September compared to 4.7% between April to July.
"Unemployment stabilised in the spring through the registration of Ukrainian refugees, the rise in the last two months has been mainly due to other categories in particular young people," the report said.
The Luxembourg Times has a new mobile app, download here! Get the Luxembourg Times delivered to your inbox twice a day. Sign up for your free newsletters here.