http://www.oecd.org/eco/surveys/economic-survey-luxembourg.htm

OECD

OECD Economics

2015 OECD ECONOMIC

SURVEY OF LUXEMBOURG

Diversifying growthLuxembourg, Friday 27th March 2015

Incomes and well-being belong to the highest

in the OECD

Difference in GDP per capita to the 10 OECD economies with the highest GDP

2

Note: Simple average of the 10 OECD countries with the highest GDP

per capita (in constant 2005 PPPs) in 2013.

Source: OECD.

Well-Being outcomes: Better Life Index, 2014Indicator range from 0 to 10 (best)

Source: OECD (2014), OECD Better Life Index,

www.oecdbetterlifeindex.org.

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

1990 91 92 93 94 95 96 97 98 99 2000 01 02 03 04 05 06 07 08 09 10 11 12 13

USD, constant 2005 PPP

Real GDP per capita, Luxembourg

Real GDP per capita, 10 highest economies

0 1 2 3 4 5 6 7 8 9

10Income and wealth

Jobs and earnings

Housing

Work and life balance

Health status

Education and skillsSocial connections

Civic engagement andgovernance

Environmental quality

Personal security

Subjective well-being

LUX OECD

Dependence on the financial sector is high

3

Share of financial and insurance activities in total

value added, 2013

Source: Eurostat.

%

0

5

10

15

20

25

30

Germany United Kingdom Switzerland Luxembourg

Structural unemployment has increased

4

Productivity

Source: OECD Economic Outlook 96.

Unemployment

-1

0

1

2

3

4

5

6

7

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Y-o-y % changes

Potential GDP per capita growth

Trend labour productivity growth

0

1

2

3

4

5

6

7

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

%

Structural unemployment rate

Unemployment rate

Main Findings

• Luxembourg is one of the most prosperous countries in the OECD and an attractive business location.

• The financial sector is an important source of high incomes.

• The economy depends to a large extent on the financial sector, creating potential vulnerabilities.

• Economic diversification could raise productivity growth and reduce vulnerabilities.

5

Key Recommendations

• Continue efforts to secure comprehensive risk assessment in financial markets and effective cross-border resolution of banks.

• Improve the evaluation of the effectiveness of public R&D spending and cluster policies to support economic diversification.

• Reduce disincentives for labour force participation of women.

• Strengthen fiscal planning via a spending review mechanism linked to the medium-term budgeting framework.

6

Strengthening the performance and

resilience of the financial sector

Banking is international

8

Banks in Luxembourg by origin (end 2014)Number, percentage in parenthesis

Source: Commission de Surveillance du Secteur Financier, Luxembourg.

Luxembourg 5 (3.3)

Belgium 7 (4.7)

Germany 33 (22.2)

France 15 (10.1)

United Kingdom 9 (6.0)Switzerland 12 (8.1)

Other EU 31 (20.9)

United States 6 (4.0)

China 6 (4.0)

Brasil 5 (3.3)

Japan 5 (3.3)

Other World 14 (9.4)

Bank credit was resilient during the crisis

9

Bank credit and non-performing loans

Source: STATEC; BCL.

0

5

10

15

20

25

30

35

40

45

2006 07 08 09 10 11 12 13

EUR billion

Credit to non-financial corporations in Luxembourg

Credit to households in Luxembourg

0

1

2

3

4

5

6

7

8

2006 07 08 09 10 11 12 13

Luxembourg Euro Area

% of total gross loans

A. Bank credit to the private sector continued

to grow during the crisis

B. Non-performing loans of credit

institutions stayed low

Non-bank business is on the rise

10

Assets of banks and investment funds

1. Undertakings for Collective Investment (UCI): net assets.

Source: CSSF

500

1000

1500

2000

2500

3000

Jan-

01

Jul-0

1

Jan-

02

Jul-0

2

Jan-

03

Jul-0

3

Jan-

04

Jul-0

4

Jan-

05

Jul-0

5

Jan-

06

Jul-0

6

Jan-

07

Jul-0

7

Jan-

08

Jul-0

8

Jan-

09

Jul-0

9

Jan-

10

Jul-1

0

Jan-

11

Jul-1

1

Jan-

12

Jul-1

2

Jan-

13

Jul-1

3

Jan-

14

Jul-1

4

EUR billion

Credit institutes: Total assets Investment Fund: Assets under management¹

Banks are comparatively well capitalised

11

Banks’ capital ratios

Note: Based on quarterly data as of December 2013; where these are not available the most recent available data are taken, extending back to

December 2012.

Source: IMF Financial Soundness Indicators report; http://fsi.imf.org/.

0

5

10

15

20

25

Spain Italy UnitedStates

Netherlands France UnitedKingdom

Switzerland Austria Belgium Germany Ireland Luxembourg

% A. Regulatory capital to risk-weighted assets

0

5

10

15

20

25

Italy Spain Netherlands UnitedStates

France Austria UnitedKingdom

Germany Belgium Switzerland Ireland Luxembourg

% B. Regulatory tier 1 capital to risk-weighted assets

Ensure a healthy financial sector

• Sound financial market regulation has supported growth of the financial sector.

• Continue to monitor financial market risk while using a comprehensive approach to risk assessment that accounts for financial linkages between banks and other financial intermediaries.

• Continue efforts to develop resolution plans and to undertake resolvability assessments so that important banks could be resolved effectively across borders.

• Continue to actively participate in international negotiations on co-ordinated action to combat tax base erosion and profit shifting of multinational enterprises. Change domestic laws as necessary.

12

Raising productivity and fostering the

diversification of the economy

Entrepreneurship

Raise investment in knowledge-based capital

15

Investment in knowledge-based capital, 2010In percent of value-added of the business sector

Source: OECD Science, Technology and Industry Scoreboard 2013.

0

5

10

15

20

25

30

35

Spa

in

Italy

Kor

ea (

2008

)

Por

tuga

l

Aus

tral

ia

Luxe

mbo

urg

Irel

and

Cze

ch R

epub

lic

Aus

tria

Japa

n (2

008)

Ger

man

y

Slo

veni

a

Net

herla

nds

Fin

land

Can

ada

(200

8)

Uni

ted

Kin

gdom

Bel

gium

Den

mar

k

Fra

nce

Sw

eden

Uni

ted

Sta

tes

%

Software and databases

R&D and other intellectual property products

Brand equity, firm-specific human capital, organisational capital

Raise R&D spending

16

R-D expenditureGross domestic expenditure in percent of GDP

Source: OECD(2014), "Main Science and Technology Indicators“.

0

0.5

1

1.5

2

2.5

2003 04 05 06 07 08 09 10 11 12

%

Luxembourg OECD

0

0.5

1

1.5

2

2.5

2003 04 05 06 07 08 09 10 11 12

%

OECD Luxembourg

A. Total B. Business Entreprise

Strengthen cooperation between enterprises

and institutes

17

SME collaboration on innovationIn percent of product or process innovative firms, 2008-10

2011 for Australia, 2006-08 for Ireland, 2009-10 for New Zealand and 2009-11 for Switzerland. SME: Small and medium-

sized enterprises. The OECD aggregate covers 30 countries in panel A and 28 in panel B.

Source: OECD (2013), OECD Science, Technology and Industry Scoreboard 2013.

0

10

20

30

40

50

60

70

Aus

tral

iaIta

lyN

ew Z

eala

ndP

ortu

gal

Est

onia

Irel

and

Net

herla

nds

Sw

itzer

land

Pol

and

Spa

inD

enm

ark

Sw

eden

Luxe

mbo

urg

Fra

nce

Ger

man

yO

EC

DN

orw

ayU

nite

d K

ingd

omB

elgi

umH

unga

ryA

ustr

iaF

inla

nd

A. Collaboration with higher education or public research institutions

0

5

10

15

20

25

30

35

Italy

Spa

inA

ustr

alia

Ger

man

yP

ortu

gal

New

Zea

land

Pol

and

Net

herla

nds

Sw

itzer

land

Irel

and

Fra

nce

Hun

gary

OE

CD

Nor

way

Bel

gium

Sw

eden

Fin

land

Luxe

mbo

urg

Aus

tria

Est

onia

Uni

ted

Kin

gdom

B. International collaboration

Enhance the potential of innovative industries

• Better evaluate the effectiveness of public R&D spending and cluster policies.

• Strengthen the cooperation between enterprises, University of Luxembourg and research institutes in Luxembourg and abroad.

18

Education and labour force

participation

Improve high school completion

20

Successful completion of upper secondary programmes, 2012

Note: N: theoretical duration of the programmes.

Countries are ranked in descending order of the successful completion of upper secondary programmes.

Source: OECD (2014), Education at a Glance. See Annex 3 for notes (www.oecd.org/edu/eag.htm).

0

10

20

30

40

50

60

70

80

90

100

Uni

ted

Sta

tes

Est

onia

Sw

eden

OE

CD

Bel

gium

Fin

land

New

Zea

land

Uni

ted

Kin

gdom Ita

ly

Chi

le

Net

herla

nds

Spa

in

Den

mar

k

Fra

nce

Nor

way

Icel

and

Luxe

mbo

urg

%

Completion after N years Completion after N+2 years

Raise female labour force participation

21

Female labour market participation rate, 2013

1. The labour force participation rate is defined as the ratio of the labour force to the working age population, expressed in percentages.

Source: OECD Labour Force Statistics.

0102030405060708090

Tur

key

Mex

ico

Italy

Chi

le

Kor

ea

Gre

ece

Hun

gary

Pol

and

Bel

gium

Slo

vak

Rep

ublic

OE

CD

Luxe

mbo

urg

Irel

and

Japa

n

Cze

ch R

epub

lic

Slo

veni

a

Fra

nce

Uni

ted

Sta

tes

Isra

el

Eur

o A

rea

Spa

in

Por

tuga

l

Aus

tral

ia

Aus

tria

Est

onia

Uni

ted

Kin

gdom

Ger

man

y

New

Zea

land

Fin

land

Can

ada

Net

herla

nds

Den

mar

k

Nor

way

Sw

itzer

land

Sw

eden

Icel

and

%

0

10

20

30

40

50

60

70

Slo

vak

Rep

ublic

Hun

gary

Cze

ch R

epub

lic

Slo

veni

a

Est

onia

Pol

and

Por

tuga

l

Gre

ece

Kor

ea

Fin

land

Uni

ted

Sta

tes

Sw

eden

Isra

el

Fra

nce

Spa

in

Chi

le

Tur

key

Icel

and

Den

mar

k

OE

CD

Can

ada

Luxe

mbo

urg

Mex

ico

Nor

way

Bel

gium

Eur

o A

rea

Italy

Aus

tria

New

Zea

land

Japa

n

Irel

and

Ger

man

y

Aus

tral

ia

Uni

ted

Kin

gdom

Sw

itzer

land

Net

herla

nds

%

A. Female labour force participation rate¹

B. Share of female part-time employment in total female employment

Nourish a high-quality labour force

• In secondary education, reduce grade repetition, provide more school autonomy and better monitor education quality.

• Increase enrolment in early childhood education with emphasis on low-income and foreign-language families.

• Reduce disincentives for labour force participation of women by charging health care contributions for each spouse individually and introducing separate income tax assessment of spouses.

22

More Information…

http://www.oecd.org/eco/surveys/economic-survey-luxembourg.htm

OECD

OECD Economics

Disclaimers:

The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without

prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.

This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers

and boundaries and to the name of any territory, city or area.

23