Economy & Politics

A year of 2020 “not that bad”

If from a health, psychological or emotional point of view the last nine months will have been trying and will leave traces, the economy is doing relatively well, assures the Idea Foundation. For the thing tank of the Chamber of Commerce, the labor market and the GDP are holding up the shock.

Jean-Michel HENNEBERT

Jean-Michel HENNEBERT

If from a health, psychological or emotional point of view the last nine months will have been trying and will leave traces, the economy is doing relatively well, assures the Idea Foundation. For the thing tank of the Chamber of Commerce, the labor market and the GDP are holding up the shock.

According to the Idea Foundation, 2020 may not be theannus horribilis feeling. While the Chamber of Commerce think tank does not question the short, medium and long term effects of the pandemic on individuals, its analysis of the economic situation is intended to be more optimistic. Or less pessimistic, it depends.


Politik, Press briefing-Council of Government, Xavier bette, Paulette Lenert, Coronavirus, Covid-19, Foto: Chris Karaba / Luxemburger Wort

It only took a few words on this subject by the Minister of Health for the hypothesis of a new confinement to come to haunt people’s minds. Simple threat or reality, this Friday’s Governing Council could be decisive.


Based on Statec’s estimates on growth in the third quarter, Muriel Bouchet and Michel-Edouard Ruben note that “during the first nine months of 2020 (…) Luxembourg’s GDP in volume would have decreased by ‘only’ 2% compared to the same period of the year 2019 ”. A performance that the two economists underline by putting into practice the results observed in our neighbors over the same period, Germany recording a decline of 5.8%, against 6.8% in Belgium and 9.5% in France.

Although likely to be revised, these figures draw a trend which should “probably not” be called into question by the resumption of activity of the pandemic at the end of the year. A prognosis based on the analysis of projections made in Germany and Belgium for the fourth quarter which expect a decline of “around 1% compared to the previous three months”. In other words, in the event of a similar scenario in Luxembourg, the recession for the year should settle at 1.7% of GDP.


Politik, Sommerinterview Pierre Gramegna, Minister der Finanzen, Foto: Guy Wolff / Luxemburger Wort

The restart pact, announced Wednesday by the Prime Minister, was detailed by the Minister of Finance. An additional plan of “700 to 800 million euros” dedicated to allow everyone “to play the game of cash”.


A result “objectively bad, but strangely not that much”, estimate Muriel Bouchet and Michel-Edouard Ruben who recall that in 2009, “the GDP of Luxembourg had fallen by 4.4%”. And for good reason, the two crises do not find their origin in the same mechanisms, the subprime crisis having had a full and violent impact on the marketplace, the main pillar of the Grand-Ducal economy. Covid-19, for its part, will have had little impact on the results of the financial sector. At least in 2020, when the outlook for 2021 looks bleak.


Finanzplatz Luxemburg, Viaduct ,, Petrusstal. Photo: Gerry Huberty

The health crisis has not spared the country’s financial sector. As insurers record lower premiums, banks brace for defaults. While for their part, the funds are restructuring their investments with the hope that the country will remain competitive.


2020 will also have been marked by a certain dynamism in the labor market. Between the third quarter of 2019 and 2020, the country will have recorded 9,000 new jobs (+ 2%), while the European trend was on the decline. Over the same period, the EU will have seen the elimination of four million jobs. The most active sectors in Luxembourg having been health and social action (+2,100), construction (+1,800) and public administration (+1,600).


Wirtschaft, Mieten, Residenz, Sozialalmanach, Wohnung, Wohnungsbau, Wohnungsmarkt, Immobilien, Immobilienmarkt, For rent, For sale, Rent, Real estate, Foto: Chris Karaba / Luxemburger Wort

Individuals and developers continue to take out loans to finalize housing purchase or construction operations. In October alone, $ 835 million was awarded.


But according to the economists of the Idea Foundation, the relative resistance of the GDP and the strength of the labor market “are not enough to make us forget the many difficulties still present”. Namely the questions about the effectiveness of vaccines, the future organizations of the world of work or even the rise in real estate prices which raise some concerns for 2021. According to the forecasts of the European Commission, a return to the situation pre-covid is not expected before 2023.


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