Recruitment is expected to pick up without leading to an immediate fall in unemployment. Statec forecasts a rate of 6.3% in 2026 and 2027, with job creation benefiting cross-border workers more than residents.
The recovery will not be enough to get jobseekers back to work quickly. In its medium-term forecasts published on Friday 9 October, Statec anticipates economic growth of 1.2% this year, followed by 1.9% in 2027. However, unemployment is expected to remain at 6.3% over these two years, compared with 6% in 2025.
This discrepancy is largely due to the distribution of new hires. Job creation “would benefit cross-border workers more than residents over this period, without any significant reduction in the number of jobseekers”, explains Statec. It would not be until 2028 that the unemployment rate would fall back to 6.1%, then to 5.8% in 2029 and to 5.4% in 2030.
Employment is nevertheless forecast to grow by 1.7% in 2026, 1.9% in 2027 and 2.4% by 2030. This recovery would still fall short of its long-term average of 3%. Businesses had largely maintained their workforce levels during the slowdown, whilst economic activity was virtually stagnant, particularly in construction, financial services and business services. Productivity had suffered as a result.
A deeper weakness
To revive the economy, Luxembourg is expected to rely primarily on its exports of services, particularly financial services. Rising stock markets and relatively stable interest rates are expected to support assets under management and activity within the sector. The construction sector is also expected to benefit from the stabilisation of interest rates. From 2028 onwards, the non-financial private sector is expected to play an increasingly significant role in the recovery, with GDP growth forecast at 2.3% in 2028 and 2029, rising to 2.4% in 2030.
But this recovery masks a deeper weakness. The economy’s growth potential – in other words, its capacity for sustainable growth – is projected to be limited to 1% in 2026, compared with a historical average of 2.9%. Even by 2030, it is projected to rise to only 1.7%. Statec points to weak productivity gains, a lack of dynamism in the labour market and low levels of investment in recent years.
On the household front, the tax reform planned for 2028 would provide a further boost to consumption. Growth is expected to rise from 2% in 2027 to 2.6% in 2028. Under the central scenario, inflation is expected to reach 1.8% this year and 2.1% next year. The expiry of the Resilienzpak – the tripartite package of measures that came into force this summer – would add 0.3 percentage points to inflation in 2027.
These forecasts, updated at the end of August and submitted to the ministry of finance to help prepare the national budget, remain fragile. Since the assumptions were finalised, tensions in the Middle East have escalated. Statec warns that the risks to inflation are now tilted to the upside. Its next forecasts, due on 4 November, could therefore revise the price trajectory.
