Wed07262017

Monday, 17 July 2017 12:36

Luxembourg’s Annual Trade Deficit Continues to Worsen

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Statec’s latest report has revealed that Luxembourg’s trade balance has continued to worsen in recent years.

Luxembourg's foreign trade is strongly oriented towards neighbouring markets, with three-quarters of its goods trade being with Germany, Belgium, France and the Netherlands. However, since 1975, the Grand Duchy’s trade balance deficit has continued to deteriorate.

In 2012, the deficit reached a historic peak by approaching €8 billion. The deterioration is mainly due to the country's energy dependency, the steady growth in household consumption and a steady decline in the industry's market share of services.

Statec has commented, however, that a negative trade balance is not in itself a sign of poor economic health. This situation would be more worrying if the outflow of capital generated by the deficit was not balanced by equivalent receipts. In Luxembourg, however, the trade deficit is more than offset by the surplus in services. The gradual transition from Luxembourg to a service economy is one of the reasons why the trade deficit continues to widen.

Over the period 2005-2015, Luxembourg's average annual trade deficit was €5.8 billion. In geographical terms, the situation is more nuanced. The deficit trade balance is notable for its mainly "regional" character. With an average of €4.5 billion, its biggest deficit is with Belgium, followed by Germany (-1.7), the Netherlands (-0.4) and France (-0.3).

Apart from neighbouring markets, the only other significant bilateral deficit is that with the United States (-0.4). The negative balance has deteriorated sharply since 2011 (€-1.0 billion in 2015), following investments in the air freight sector.

In general, Luxembourg's bilateral balance with most countries is in surplus. In 2015, Luxembourg recorded 166 bilateral surpluses against 27 deficits.

Photo by Statec

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