The Swiss IMD ranking for 2023 shows disappointing results for Luxembourg. The country, which was almost always in the top 15, has now dropped to 20th place. The drop from last year's 13th position represents a loss of a massive 7 points.
Alongside the economic crisis, which is now affecting everyone, Luxembourg's decline is primarily due to a shortage of labor, housing problems, and a lack of accessible digital tools. These factors reduce the competitiveness of the Luxembourg economy.
The IMD ranking is based on 256 different indicators and domains of measuring; and includes not only statistics but also the opinions of economic and business experts. Since 1989, the IMD ranking has studied more than 64 countries: not only European countries, but also Japan, Singapore, China, USA, New Zealand and others.
After a period of stagnation in recent years, the Luxembourg economy has managed to maintain a relatively high level of productivity. Despite some criticism regarding the importance of cross-border workers for the stability of the economy of the country, Luxembourg still has the highest GDP per capita of all the countries surveyed for the ranking. In 2022, the country's GDP per capita was 127,479 dollars, well ahead of Norway (106,337 dollars) and Ireland (103,337 dollars).
Overall, Denmark once again leads the ranking. Ireland and Switzerland share second and third place. The USA, the United Arab Emirates, Singapore and China also appear in the top ten most attractive countries.
The high costs of labor in Luxembourg and the worsening situation with it (compared to neighboring countries at least) raise concerns. The Grand Duchy applies an automatic and complete system of wage indexation, meaning that companies are becoming increasingly uncompetitive. Many of them prefer to relocate to countries with lower wages for employees.
As a result, Luxembourg now ranks 66th in terms of the "risk of company relocation" indicator of the study. Hence, the country must take measures to strengthen the business environment and address its declining attractiveness in this area. Results of a survey of business leaders indicate this as well.
Luxembourg is also now ranked 32nd in terms of the regulatory framework supporting business. Before, it was ranked 18th, so another big drop to work on for the authorities.
However, there is a positive side to this. The country's public policy is very agile. It can adapt quickly to economic changes. Compared with other countries, this is a major advantage for Luxembourg.