STATEC predicts the future of Luxembourg's economy

Luxembourg's National Institute for Statistics and Economic Studies (STATEC) has published updated macroeconomic forecasts, highlighting key trends for 2026 and beyond. The focus is on earlier wage indexation, easing inflationary pressure from energy resources, and a gradual improvement in the labour market.

Automatic wage indexation, previously expected in the summer of 2026, is now forecast for the second quarter — from April to June. This is based on expected inflation of 1.8% this year, which activates the standard income adjustment mechanism. The increase will be 2.5% and will affect salaries, pensions and payments to civil servants. In practice, this means that gross salaries will be multiplied by a factor of 1.025. The indexation mechanism remains one of the key tools for maintaining purchasing power in a country with a high proportion of salaried workers and significant dependence on cross-border labour.

The inflation picture is becoming more mixed. On the one hand, STATEC expects energy prices to fall: in 2026, electricity, gas and oil could become cheaper by an average of 6.3%, and in 2027 by another 3.5%. The strengthening of the euro, which makes imported resources cheaper, plays a significant role. This will be the main factor slowing down overall inflation.

On the other hand, pressure remains in the food and services segment. Food prices are forecast to rise by 2.8% this year, while services will become 2.2% more expensive. Nevertheless, in the medium term, inflation should stabilise around the target level of 2%, which is in line with the European Central Bank's guidelines and signals a return to more predictable price dynamics.

The situation on the labour market remains difficult, although there are signs of future improvement. As of 31 January, there were 21,255 registered unemployed residents in the country, corresponding to a rate of 6.3%. The increase affected all age groups, but was particularly noticeable among highly skilled professionals. The greatest pressure is being felt in the areas of administrative support, accounting and information technology — a trend that has been observed for several months and reflects structural changes in the economy.

STATEC links the prospects for a decline in unemployment to the expected acceleration in economic growth. By 2029, the rate could fall to 5.2%. However, the dynamics will depend on external conditions, given Luxembourg's open and export-oriented economic model.