Luxembourg Economy Contracts in Q4 as Investment Plummets

Luxembourg’s economy shrank by 0.1% in Q4 2025, following an upwardly revised 1.2% expansion in Q3, ending a streak of four consecutive quarters of solid growth. The contraction was mainly driven by a sharp drop in fixed investment (-11.5% vs 12.8% in Q3), while growth also slowed for household consumption (0.8% vs 1.1%) and public spending (1.1% vs 1.5%). Net trade provided a modest boost, as exports fell less than imports. On an annual basis, Luxembourg’s GDP growth eased to 2.4% in Q4, down from 3.2% in the previous quarter. For the full year 2025, the economy grew 0.6%, slightly above 0.4% in 2024 but still well below the historical average of 2.5% per year during 2010–2019.

Luxembourg’s economy expanded 1.1% quarter-on-quarter in the three months to September 2025, from an upwardly revised 0.8% growth in the second quarter. This marked the strongest quarterly performance since the first quarter of 2024, amid a rebound in household consumption (1.2% vs -0.2% in Q2) and a further increase in government spending (1.3% vs 0.7%). At the same time, gross fixed capital formation jumped 12.1%, after a 2.6% decline in the previous period. However, net trade weighed on overall growth, as imports rose 1.9%, outpacing the 0.7% increase in exports. On an annual basis, GDP grew 2.7% in the third quarter, following an upwardly revised 0.7% fall in the prior quarter.

Luxembourg’s economy expanded 0.6% quarter-on-quarter in the second quarter of 2025, slightly easing from an upwardly revised 0.7% growth in the previous quarter. The growth was primarily driven by household consumption (0.2% vs -0.5%) and government spending (1.0% vs 1.3%), but was dragged down by a drop in gross fixed capital formation (-3.0% vs 3.0%). In external trade, exports remained flat (0.0% vs 5.8%), while lower imports (-0.1% vs 5.8%) slightly supported GDP. On an annual basis, GDP fell 0.2% in Q2, following a 1.9% decline in the prior quarter.