Luxembourg experiencing unprecedented economic downturn, says business lobby

Luxembourg’s economy is facing an unprecedented downturn, the country’s business lobby said on Tuesday, adding that government measures to try and turn the corner “often remain too timid and lack ambition”.

In a report assessing the state of the economy over the past year, entitled D’une tempête à l’autre (From one storm to another) released on Tuesday, the Chamber of Commerce called on the government to focus its efforts on helping companies to weather growing geopolitical instability and making the economy more competitive.

“At a time when global risks are more interconnected than ever, Luxembourg must strengthen its resilience by addressing the factors that hinder its productivity and attractiveness,” the head of the Chamber of Commerce, Carlo Thelen, said in a press release to accompany the report.

“We must put the competitiveness of the economy and the profitability of companies back at the heart of public action,” he added, with a warning that the economic environment for companies had “undergone a profound transformation” since 2020 with repeated shocks.

The statement from the business group said that the introduction of reinforced customs duties in the United States in 2025 increased trade uncertainty to levels not seen in fifteen years. It added that current tensions in Europe, the Middle East and Asia, “further aggravate this instability”.

It came as the Grand Duchy’s official statistics agency Statec said in a separate report also published on Tuesday that global economic activity “remains under threat from the negative effects of rising trade tensions”.

“The international context remains marked by uncertainties related to American policy,” Statec said.

A bi-yearly poll from the Chamber of Commerce found that 67% of businesses are “confident or very confident” in Luxembourg’s economy, compared to nearly 90% five years ago.

This shows that “business leaders’ confidence in the future of the Luxembourg economy “continues to erode and is no longer back to the levels observed before 2020”, the Chamber of Commerce said.

Companies told the business group that the three main obstacles they face for 2026 are the cost of labour, a shortage of skilled labour and regulatory burdens.

Statec said that a “moderate recovery” is taking hold in Luxembourg, which is expected to strengthen in 2026 and 2027”.

The statistics bureau expects inflation to reach 2.2% in 2025, but to slow to 1.5% in 2026 due to a drop in energy prices – particularly electricity.

“A slowdown in global activity is expected for next year, but less pronounced than expected,” Statec added.