Economy & Politics

Luxembourg under monitoring

The Idea foundation presented its new economic and social dashboard on Friday. Detailed monthly monitoring adapted to the current crisis, aiming on the one hand to understand the consequences of covid-19 and on the other hand, to help decision-makers in their decisions.

Anne-Sophie DE LA BARRE DE NANTEUIL-BEDEL

The Idea foundation presented its new economic and social dashboard on Friday. Detailed monthly monitoring adapted to the current crisis, aiming on the one hand to understand the consequences of covid-19 and on the other hand, to help decision-makers in their decisions.

“Follow the situation like milk on fire”. It is in these terms that the economist Vincent Hein summarizes the objective of the new dashboard set up by the Idea foundation. Launched on Friday, it aims to understand the consequences of the covid-19 pandemic. Because according to the experts of the foundation, if it is certain that the virus will mark the starting point of a new crisis, it is however impossible at present to know its impact, its form or even its consequences in the medium term.

If similar arrangements already exist, the think tank of the Chamber of Commerce will take the pulse of Luxembourg “as long as the economic and social situation requires it” on the basis of 22 criteria. Criteria analyzing five areas, namely economic activity, the labor market, social situation, public finances and the European economic environment.


Coronavirus - Leere Plätze - Luxemburg - Lost City - Drone - bvd Royal - Foto: Pierre Matgé / Luxemburger Wort

Three weeks after the presentation of the government program of 8.8 billion euros dedicated to supporting the functioning of companies, the negative impact of covid-19 on Luxembourg remains unclear, estimates on Tuesday the Idea Foundation which plans effects until in 2023.


If a “quiet slowdown” was already announced before the crisis, the pandemic and containment measures plunged the country’s economy into a rut. According to its latest study, Statec estimates the decline in economic activity at 25%. In March and April last year, around 30% of employees were placed on short-time work. An unequaled proportion, and largely exceeding that observed during the 2009 crisis. Eleven years ago, the measure concerned “only 3.4% of employees in the Luxembourg economy, or ten times less than at present”, recalls Vincent Hein.

However, sectors very unequally affected. In industry, “already declining before the crisis”, the forecasts are negative. 78% of companies anticipate a drop in activity and 59% of them fear a decline in employment, says the expert. On the other hand, in construction, “no big dive” expected. A “paradox” for a sector that has come to a complete halt for five weeks (-90% of activity).

Despite the difficulties encountered, such as the additional costs linked to delays, companies in the sector indeed judge the “order books still supplied”. But the question remains whether “residents will postpone their projects or not,” says Vincent Hein. As for trade, the situation appears “or all black or all white”. Because if the stores of first necessity have been able to remain open, others have been on the contrary completely stopped for almost two months.

According to the survey conducted by the foundation, the sector also says that it is pessimistic about the recovery and despite the solidarity initiatives that have emerged. Projects that the foundation considers however “interesting to support” both currently for its maintenance and the lifting of the containment for its restart.


If the general deconfinement will be lifted next Monday, the Horeca sector will not, however, be able to reopen before June. To cope with this difficult period, online platforms have emerged to help businesses hit hard by the crisis.


As for the financial center, the drop in activity would be less marked. It would also be “too early to draw conclusions,” said Vincent Hein. Fund assets (UCIs) however fell sharply in March (-11.1%), due to the downturn in the financial markets, but also due to a downturn in investment.

But for the experts of the think tank of the Chamber of Commerce, it would be impossible to assess the impact of the crisis without observing Europe. Luxembourg is indeed “very dependent” on its neighbors, they recall. In the first quarter of 2020, GDP in the euro area fell by 3.8%, a historic drop like those recorded in France (-5.8%) or in Belgium (-3.9%). For 2020, the European Commission forecasts a 7.7% recession in the euro area. In addition, in the Greater Region, the number of job seekers is increasing, a first since 2014.


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