Luxembourg businesses are not investing

Luxembourg's Economy Minister Lex Delles has responded to a parliamentary enquiry about the low level of investment by private companies in the country. According to STATEC data, since 2015 Luxembourg has remained in last place among Eurozone countries in terms of the share of investment in GDP. There are several reasons for this. Both micro and macroeconomic.

The share of industry, traditionally intensive in capital investment, fell from 18% of GDP in 2007 to 11% in 2023. Services and the financial sector, less prone to large investments, remain the backbone of the economy.

The crises of pandemic and rising energy prices, as well as tight credit policy and interest rate increases by the European Central Bank from 2022, have also helped to curb the investment impulse of some businesses. In addition, 95 per cent of loans in Luxembourg have variable rates, which has increased the financial burden on businesses.

To stabilise the situation, the government is actively introducing support programmes:

Lower interest rates from mid-2024 should also gradually restore investment activity. However, for sustainable growth, it is important for the government to continue to incentivise investment in key sectors, especially as part of the dual transition - digital and environmental.