The economy of Luxembourg: stages of development, incomes of the population and living standards

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:53

Luxembourg is a country in Western Europe, which is traditionally called the Grand Duchy. It is very small and has no access to the sea. In the north it borders with Belgium, in the south and west with France, in the east with Germany. The area of this state is 2586.4 km². The population in 2018 was 602,005 people. The population density is 233 people/km^{2. The economy of Luxembourg is focused on the service sector, financial activities, industry, agriculture and tourism.}

General features of the country

Luxembourg is part of the European Union, a member of the UN, NATO, OECD. Belongs to the Benelux zone. The country has 3 official languages: French, German and Luxembourgish. The generally accepted currency here is the euro. The capital is the city of Luxembourg. It is also the largest settlement of this state.

Luxembourg is true to its historical traditions. It still has a constitutional monarchy. The time zone is UTC+1. Luxembourg has its own internet domain -.lu.

Luxembourg's economy in brief

The economic activity of Luxembourg has a number of specific features. There are few valuable resources in the country, there are no outlets to the seas, the territory is very small. At the same time, the development of specific areas has made Luxembourg one of the most prosperous countries in the world. It is considered one of the richest states in Europe and the world. The standard of living of the population is very high.

The main feature of this country is the placement on its territory of a large number of banks, representative offices of organizations, offshore companies - in total about 1000 investment funds and over 200 banks. No other city in the world can boast of such indicators.

A highly developed service sector underpins the state's economy. Banking is at the forefront of economic activity. The most attractive banking laws among the EU countries apply here. They guarantee the secrecy of deposits. The massive development of the financial sector began in the 60s of the 20th century. Then foreign banks began to open their institutions in this country. However, the real boom in the financial sector of Luxembourg began in the 80s, when it was filled with German investors seeking to avoid high national taxes. Investment funds began to spread actively.

Thus, the structure of Luxembourg's economy is quite specific, but quite viable. Thanks to it, the state manages to get ahead of many EU countries, having practically no own resources andaccess to the seas.

Economic Indicators

The economy of Luxembourg is considered highly developed. There is stable economic growth, low inflation and unemployment. The per capita GDP is $150,554 and the country's total GDP was $78.3 billion in 2013. Unemployment was 4.1%. Inflation is only 1.6% per year. Such indicators can be considered very good.

The largest contribution to the economy and GDP is made by the service sector - 69%. It employs 90% of the population of the country. Industry accounts for 30%, and agriculture - only 1%. The share of employed in the industrial sector is 8%, and in agriculture - 2%. Specifically, the financial sector contributes about 10% to GDP.

The standard of living of the population consists of high incomes and low taxes. It is difficult (or impossible) to find a person with incomes below the subsistence level in the country. Maximum taxes tended to decrease. However, they cannot be called very low.

The most important for Luxembourg are 3 large international companies, whose management is located in the city of Luxembourg. These are the Arbed steel concern, the SES-Astra telecommunications company and the RTL television company.

Resources and economy

The main resource of the country is iron ore. Thanks to her, the production of iron and cast iron was established here. These industries provide about 10% of Luxembourg's GDP. Since the mid-90s of the 20th century, the role of metallurgy in the economydropped sharply. The extraction of raw materials has completely stopped. This was largely due to the low quality of local iron ores, making their extraction unprofitable. Available resources of building raw materials and waste from metallurgy are used to produce cement. In addition to them, they produce brick, concrete, slate, gypsum.

Agriculture is well developed due to favorable climatic and transport conditions. Meat and dairy cattle breeding, viticulture, and gardening are being developed here. First-class vineyards grow in the valley of the river. Mosel. They are used to make elite wines: Rivaner, Moselle, Riesling. Apples, pears, plums, cherries are grown from fruits. Flower cultivation is developed, although this industry is gradually declining.

Currently, crop production is gradually losing its former importance. The number of people employed is decreasing. Agriculture in Luxembourg is characterized by a high level of labor mechanization and the active use of fertilizers. These directions in the conduct of agricultural activities are more pronounced here than in other countries.

High-tech industries are based on the creation of telecommunications networks, the production of video and audio equipment. Plastics, glass, fabrics, porcelain are also produced here, as well as the production of chemicals and machines. Firms from the USA are involved in the construction of enterprises. High knowledge of different languages among the local population makes Luxembourg an attractive country for foreign companies.

Cons of the Luxembourg economy

Bigpart of the country's GDP is revenue from the provision of services to international partners. Therefore, Luxembourg is highly dependent on other countries. Such dependence led to the fact that the crisis of 2008-2011 was experienced by this state very hard. Another disadvantage is the need to import all types of energy resources: oil, gas, coal.

Transport sector

International transport routes leading to Germany, France, Belgium are laid through the country. The total length of these highways is 5166 km, and the railways - only 274 km (242 km electrified). Goods ships float on the Moselle River. Tourism is also of great importance (6% of the contribution to GDP). The total length of the footpaths is 5,000 km. The main attractions are medieval castles and vineyards.

Foreign economic activity

The economy of Luxembourg is focused primarily on trade with other countries and the provision of services. Basically, trade is carried out with the EU, the USA, and the share of the EU is many times larger and accounts for 80-90 percent of the foreign trade balance. Chemistry, steel products, equipment, rubber products are exported. The country buys various goods, including food, as well as equipment and oil products.

Conclusion

The economic development of Luxembourg is a steady progressive process leading to an increase in the well-being of the population. At the same time, the country is highly dependent on other states, especially countriesEU members. Due to the lack of its own resources, Luxembourg is forced to import them from abroad. In addition to industry and the financial sector, agriculture and tourism are developed here. The service sector is the main engine of the economy. And the global financial and economic crises hit hard on the economic life of the country. Luxembourg's economy is one of the highest in the world and in the European Union. Foreign visitors are attracted by relatively low taxes and favorable conditions for holding deposits.