The Luxembourg Economy in 2003-2004 a Kaleidoscope the Luxembourg Economy in 2003-2004 a Kaleidoscope the Luxembourg Economy in 2003-2004 a Kaleidoscope Summary
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The Luxembourg Economy in 2003-2004 A kaleidoscope The Luxembourg Economy in 2003-2004 A kaleidoscope The Luxembourg Economy in 2003-2004 A kaleidoscope Summary 1 Background: a few structural elements 9 1.1 Exceptional growth from 1985 to 2000 10 1.2 Job-intensive growth 13 1.3 From 2001 to 2004: reversal in the economic cycle and recovery 18 1.4 Labour productivity and employment: contrasting trends 20 1.5 Use of foreign labour: cross-border workers and immigrants 29 1.6 Activity rates: delayed entry into the labour market, early retirement and increase in the female activity rate 32 1.7 Structure of value-added: the “weight” of financial services 34 1.8 Business demography: a dynamic development 41 1.9 External economic relations: importance of foreign direct investment and current account surplus 44 1.10 Wage restraint 48 1.11 Public finances: a fragile balance? 52 1.12 Poverty rate and income distribution: relative stability 63 2 The economic situation in 2004 71 Impressum 2.1 The international economic situation: Europe lagging behind 72 Publishing manager: Serge ALLEGREZZA 2.1.1 United States: growth and deficits 72 Editor: Paul ZAHLEN 2.1.2 Asia: China and Japan: increasingly close ties 73 Contributions: Ferdy ADAM, Martine HILDGEN, Jean LANGERS, 2.1.3 Europe: still bringing up the rear 74 Bastien LARUE, Véronique SINNER, Guy SCHULLER 2.2 Economic situation in Luxembourg 75 Technical coordination: Guy ZACHARIAS 2.2.1 2004: a satisfactory year except for the labour market 75 2.2.2 Forecasts: sustained, but not exceptional growth 79 Design and layout: INTERPUB' 2.3 Recent activity in a number of economic sectors: mixed performance 82 Printing: IMPRIMERIE CENTRALE 2.3.1 Industry: 2004 was a good year 82 Translation: EUROSCRIPT 2.3.2 Construction: building and civil engineering moving in opposite directions 84 2.3.3 Commerce: slowdown 87 This publication has been produced with the support 2.3.4 Financial sector: good performance by UCIs and sustained growth of the insurance sector 89 of the Ministry of Foreign Affairs and Immigration – 2.4 Prices and wages: inflation restrained, moderate growth in wage costs 95 Luxembourg Presidency of the Council of the European Union 2.5 External economic relations: balance of services showing a record surplus, growing current account balance 98 2.6 Employment and unemployment: employment recovering, but unemployment rate still on the increase 103 Central Service for Statistics 3 Thematic reports 109 and Economic Studies 3.1 Lisbon Strategy and structural indicators: Luxembourg’s situation and margin for manœuvre 110 13, rue Erasme 3.2. Competitiveness indicators 132 B.P. 304 3.3 Innovation and R&D: strengths and weaknesses of Luxembourg 141 L-2013 Luxembourg 3.4 Information and communication technologies (ICT) in 2003-2004: towards an information society 145 3.5 Stock market indices and economic growth 154 E-mail: [email protected] 3.6 International business cycle indicators: their forecasting capability for the Luxembourg economy 156 Internet: www.statec.public.lu 3.7 GDP, value-added and FISIM: the case of Luxembourg 158 Tel.: (+352) 478-4219 3.8 Prices and price levels: international comparisons 162 3.9 Expenditure by cross-border workers in Luxembourg 171 April 2005 3.10 Demography: dynamic growth, questions of mobility and housing 173 ISBN 2-87988-059-9 3.11 Wages and salary costs: how are they measured? 187 3.12 Standard of living, poverty and social exclusion in international comparisons 201 Copies are authorised provided the source is mentioned. There are several reasons for launching a new publication The Lisbon Strategy, descredited by its mediocre results, STATEC: statistical office Foreword on Luxembourg’s economy and society. STATEC’s three main has become more realistic: it is no longer a question of beco- The Central Statistical and Economic Studies Office (STATEC) motives are the: ming the most competitive economy in the world, but deriving is also changing. It should be borne in mind that STATEC has maximum benefit from science and technology to modernize a dual mission: the production of statistics on the one hand, ➔ wish to communicate not only gross figures and databases, the European social model. Each government is expected to and analysis and forecasting on the other. The first function, but also, and above all, analyses to make the observations present a National Action Plan, in which it sets realistic targets that of a statistical office, has developed very strongly to com- intelligible; for growth and employment and presents the policies that it ply with the injunctions of Community regulation: the European proposes to implement. Sooner or later, it will be necessary to Commission and the Central Bank have developed a growing ➔ requirement to summarize the studies and research evaluate the effects of these policies and compare the targets appetite for data, which they request in ever-greater volume conducted by STATEC or by research institutes, sometimes announced with the results obtained: there too, harmonized and at more frequent intervals. The production of quarterly jointly; and reliable indicators are required. national accounts, a difficult and delicate exercise for a small economy, is an illustration of this development. ➔ need to report regularly and comprehensively on the state of Luxembourg’s economy and society and the outlook. Lisbon-Luxembourg Following on from the report "Une paille dans l’acier" STATEC: research centre This year also offers a special and rare opportunity to launch ("A straw in the steel") by Prof. L. Fontagné, STATEC was The second function, analysis and forecasting, is just as the first book in this series: that of Luxembourg’s Presidency invited, together with the Competitiveness Observatory, important, because it enables the mass of data collected of the European Union, and especially the ratification of the to draw up the "Lisbon" National Action Plan, in particular to be understood, and made intelligible for use in determining Constitutional Treaty for the European Union, which will be by setting up a management dashboard of the Luxembourg economic policy. STATEC has improved its annual forecasting put to a referendum. STATEC wants to make its contribution economy. This management dashboard, which uses data instruments, and is working on producing infra-annual macro- to the debate by setting the Grand Duchy, which has developed gathered or produced by STATEC, will take account of the econometric models. Models for long-term forecasting of and prospered in a peaceful Europe, in a broader political social, economic and environmental dimension. the country's population and economic potential have been and economic context. developed. These tools and results are decisive in explaining, for instance, the financial sustainability of our welfare state, Break in the growth pattern, or minor turbulence? or land-use planning. Advances in econometrics and informa- European economic governance The year 2004 probably marks the end of a period of an excep- tion technology are facilitating the analysis of rich individual The Luxembourg presidency of the EU has carried out reforms tional, clearly perceptible slowdown in the Luxembourg busi- data on businesses and households. Many projects are ongoing of economic governance: the reform of the Stability and Growth ness cycle, which had interrupted an exceptional period of – often in partnership with research centres and universities – Pact as well as the relaunch of the Lisbon Strategy. The exces- growth. Was this minor turbulence or a break in the growth in the field of labour and social cohesion as well as productivity sive harshness of the common rules for managing national pattern that we had previously experienced and to which and new information and communication technologies or budgets was justified by the realization of the Economic and Luxembourg had become accustomed or had even taken entrepreneurship. Monetary Union, and the introduction of the euro in a currency for granted? Although the result may be the envy of other exchange area which was far from optimal. The reform decided European countries, growth remained below its potential, This publication is intended for a wide audience, and is distri- by the European Summit in March 2005 will enable these rules too weak to stem the rising unemployment rate. The system buted as a book illustrating the way in which the economy is to be applied more intelligently, in particular by taking account of production, which is still insufficiently diversified, relies working in the short term, as well as its strengths and weak- of the position of the economy in the business cycle and the on financial activities, the results of which are tied to the nesses, the opportunities and hazards. The book attempts to nature of the structural reforms that public money is intended fluctuations in share prices and the volatility of the financial avoid the esoteric jargon used by economists, the technical to promote. Harmonized budgetary statistics are the responsi- markets. terminology of statisticians, and the hollow language of tech- bility of statisticians who must demonstrate the utmost profes- nocrats, while making no concessions in terms of scientific sionalism and impeccable scientific impartiality in carrying out rigour. their work. I hope you enjoy reading it, and invite your comments. Dr S. Allegrezza 6 7 Background: a few structural elements Graph 1.1.1 1.1 GDP per capita in PPS, 1960-2004 (EU-15 = 100) 200 EU-15 Germany 180 Ireland Netherlands