Against the backdrop of the Russian invasion of Ukraine and soaring oil prices, it seems increasingly likely that there will be two wage indexations in 2022.
The next indexation is likely to come as early as next month, given the prices of fuel, heating oil, and natural gas.
In the midst of these uncertain times, the National Institute of Statistics and Economic Studies (STATEC) has published its medium-term macroeconomic projections.
According to STATEC, Luxembourg is actually expected to weather the crisis quite well.
Growth should be maintained, although it will gradually decline. After an initial increase from 3.5% this year to 4% in 2023, it is expected to drop to 2.2% in the following three years.
By 2026, an increase of 70,000 jobs is expected in Luxembourg.
STATEC expects the number of cross-border workers to rise to 250,000, accounting for more than half of the new jobs created. By 2026, the Grand Duchy is expected to have 700,000 inhabitants.
According to STATEC, the unemployment rate should remain stable at around 4.5% until 2026.
The inflation rate is at record highs in 2022, reaching 4.4%, but it is expected to stabilise at around 1.4% in the coming years.
It is difficult to predict the macroeconomic consequences of the conflict in Ukraine, STATEC explains. The Institute expects the European Central Bank to raise the key interest rate. The stock markets would then lose momentum, but the financial sector would ultimately benefit from higher interest rates.
Public finances remain relatively balanced, with a tendency towards a surplus, with the state benefiting above all from a dynamic labour market.
The development of the oil price remains uncertain. A year ago, the price of a barrel of oil was €43, while today it is over €100.
PDF: Projections macroéconomiques à moyen terme