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Published on 16.03.2022
Energy prices skyrocketed as the economy rebounded after lockdown. Photo: Shutterstock
Luxembourg’s observatory of price formation on 16 March published a report analysing the evolution of inflation in the grand duchy over 2021.
The structure, monitored by the economy ministry, registered inflation of 2.53% for Luxembourg, slightly higher than the average found in the European Union (2.47%). The grand duchy fared better than most of its neighbouring countries, with Germany (3.21%), Belgium (3.22%) and the Netherlands (2.83%) recording a starker increase. France, however, had a slower increase of inflation (2.07%).
The introduction of a CO2 tax in 2021 as well as higher service prices–1.50% last year compared to 1.27% the year prior–and the stark increase in energy costs contributed significantly to the speed at which inflation is growing in Luxembourg, according to the report. The pandemic changed the consumption habits of resident households, which also impacted prices of various goods and services.
Financial services (5.2%) and hairdressers and beauticians (3.6%) became more expensive, in part due to the wage indexation of 2.5% in October 2021. The biggest increase was recorded for energy prices–due to the economic rebound following the pandemic and lockdown. The price of heating oil (50.1%), diesel (25.1%), petrol (22.6%), liquefied gas (19.0%) and coal gas (18.4%) rose the most. With the conflict between Ukraine and Russia, this trend is likely to get worse.
The observatory also noted that the fixed prices–which are set by public authorities–for transport decreased by 53.8% over a year, thanks to the implementation of free public transport. For waste and wastewater collection, prices increased, as did those for public leisure venues such as cinemas. Medical services also became more expensive by 5.4% as the demand increased over 2021.