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Germany vs. Luxembourg

Economy

GermanyLuxembourg
Economy - overview

The German economy - the fifth largest economy in the world in PPP terms and Europe's largest - is a leading exporter of machinery, vehicles, chemicals, and household equipment. Germany benefits from a highly skilled labor force, but, like its Western European neighbors, faces significant demographic challenges to sustained long-term growth. Low fertility rates and a large increase in net immigration are increasing pressure on the country's social welfare system and necessitate structural reforms.

Reforms launched by the government of Chancellor Gerhard SCHROEDER (1998-2005), deemed necessary to address chronically high unemployment and low average growth, contributed to strong economic growth and falling unemployment. These advances, as well as a government subsidized, reduced working hour scheme, help explain the relatively modest increase in unemployment during the 2008-09 recession - the deepest since World War II. The German Government introduced a minimum wage in 2015 that increased to $9.79 (8.84 euros) in January 2017.

Stimulus and stabilization efforts initiated in 2008 and 2009 and tax cuts introduced in Chancellor Angela MERKEL's second term increased Germany's total budget deficit - including federal, state, and municipal - to 4.1% in 2010, but slower spending and higher tax revenues reduced the deficit to 0.8% in 2011 and in 2017 Germany reached a budget surplus of 0.7%. A constitutional amendment approved in 2009 limits the federal government to structural deficits of no more than 0.35% of GDP per annum as of 2016, though the target was already reached in 2012.

Following the March 2011 Fukushima nuclear disaster, Chancellor Angela MERKEL announced in May 2011 that eight of the country's 17 nuclear reactors would be shut down immediately and the remaining plants would close by 2022. Germany plans to replace nuclear power largely with renewable energy, which accounted for 29.5% of gross electricity consumption in 2016, up from 9% in 2000. Before the shutdown of the eight reactors, Germany relied on nuclear power for 23% of its electricity generating capacity and 46% of its base-load electricity production.

The German economy suffers from low levels of investment, and a government plan to invest 15 billion euros during 2016-18, largely in infrastructure, is intended to spur needed private investment. Domestic consumption, investment, and exports are likely to drive German GDP growth in 2018, and the country's budget and trade surpluses are likely to remain high.

This small, stable, high-income economy has historically featured solid growth, low inflation, and low unemployment. Luxembourg, the only Grand Duchy in the world, is a landlocked country in northwestern Europe surrounded by Belgium, France, and Germany. Despite its small landmass and small population, Luxembourg is the fifth-wealthiest country in the world when measured on a gross domestic product (PPP) per capita basis. Luxembourg has one of the highest current account surpluses as a share of GDP in the euro zone, and it maintains a healthy budgetary position, with a 2017 surplus of 0.5% of GDP, and the lowest public debt level in the region.

Since 2002, Luxembourg's government has proactively implemented policies and programs to support economic diversification and to attract foreign direct investment. The government focused on key innovative industries that showed promise for supporting economic growth: logistics, information and communications technology (ICT); health technologies, including biotechnology and biomedical research; clean energy technologies, and more recently, space technology and financial services technologies. The economy has evolved and flourished, posting strong GDP growth of 3.4% in 2017, far outpacing the European average of 1.8%.

Luxembourg remains a financial powerhouse - the financial sector accounts for more than 35% of GDP - because of the exponential growth of the investment fund sector through the launch and development of cross-border funds (UCITS) in the 1990s. Luxembourg is the world's second-largest investment fund asset domicile, after the US, with $4 trillion of assets in custody in financial institutions.

Luxembourg has lost some of its advantage as a favorable tax location because of OECD and EU pressure, as well as the "LuxLeaks" scandal, which revealed advantageous tax treatments offered to foreign corporations. In 2015, the government's compliance with EU requirements to implement automatic exchange of tax information on savings accounts - thus ending banking secrecy - has constricted banking activity. Likewise, changes to the way EU members collect taxes from e-commerce has cut Luxembourg's sales tax revenues, requiring the government to raise additional levies and to reduce some direct social benefits as part of the tax reform package of 2017. The tax reform package also included reductions in the corporate tax rate and increases in deductions for families, both intended to increase purchasing power and increase competitiveness.

GDP (purchasing power parity)$4,482,448,000,000 (2019 est.)

$4,457,688,000,000 (2018 est.)

$4,401,873,000,000 (2017 est.)

note: data are in 2010 dollars
$70.966 billion (2019 est.)

$69.373 billion (2018 est.)

$67.28 billion (2017 est.)

note: data are in 2010 dollars
GDP - real growth rate0.59% (2019 est.)

1.3% (2018 est.)

2.91% (2017 est.)
2.31% (2019 est.)

3.14% (2018 est.)

1.81% (2017 est.)
GDP - per capita (PPP)$53,919 (2019 est.)

$53,768 (2018 est.)

$53,255 (2017 est.)

note: data are in 2017 dollars
$114,482 (2019 est.)

$114,110 (2018 est.)

$112,823 (2017 est.)

note: data are in 2010 dollars
GDP - composition by sectoragriculture: 0.7% (2017 est.)

industry: 30.7% (2017 est.)

services: 68.6% (2017 est.)
agriculture: 0.3% (2017 est.)

industry: 12.8% (2017 est.)

services: 86.9% (2017 est.)
Population below poverty line14.8% (2018 est.)17.5% (2018 est.)
Household income or consumption by percentage sharelowest 10%: 3.6%

highest 10%: 24% (2000)
lowest 10%: 3.5%

highest 10%: 23.8% (2000)
Inflation rate (consumer prices)1.4% (2019 est.)

1.7% (2018 est.)

1.5% (2017 est.)
1.7% (2019 est.)

1.5% (2018 est.)

1.7% (2017 est.)
Labor force44.585 million (2020 est.)476,000 (2020 est.)

note: data exclude foreign workers; in addition to the figure for domestic labor force, about 150,000 workers commute daily from France, Belgium, and Germany
Labor force - by occupationagriculture: 1.4%

industry: 24.2%

services: 74.3% (2016)
agriculture: 1.1%

industry: 20%

services: 78.9% (2013 est.)
Unemployment rate4.98% (2019 est.)

5.19% (2018 est.)
5.36% (2019 est.)

5.46% (2018 est.)
Distribution of family income - Gini index31.9 (2016 est.)

30 (1994)
34.9 (2017 est.)

26 (2005 est.)
Budgetrevenues: 1.665 trillion (2017 est.)

expenditures: 1.619 trillion (2017 est.)
revenues: 27.75 billion (2017 est.)

expenditures: 26.8 billion (2017 est.)
Industriesamong the world's largest and most technologically advanced producers of iron, steel, coal, cement, chemicals, machinery, vehicles, machine tools, electronics, automobiles, food and beverages, shipbuilding, textilesbanking and financial services, construction, real estate services, iron, metals, and steel, information technology, telecommunications, cargo transportation and logistics, chemicals, engineering, tires, glass, aluminum, tourism, biotechnology
Industrial production growth rate3.3% (2017 est.)1.9% (2017 est.)
Agriculture - productsmilk, sugar beet, wheat, barley, potatoes, pork, maize, rye, rapeseed, triticalemilk, wheat, barley, triticale, potatoes, pork, beef, grapes, rapeseed, oats
Exports$2,004,158,000,000 (2019 est.)

$1,984,745,000,000 (2018 est.)

$1,937,273,000,000 (2017 est.)
$133.61 billion (2019 est.)

$132.487 billion (2018 est.)

$131.834 billion (2017 est.)
Exports - commoditiescars and vehicle parts, packaged medicines, aircraft, medical cultures/vaccines, industrial machinery (2019)iron and iron products, tires, cars, broadcasting equipment, clothing and apparel  (2019)
Exports - partnersUnited States 9%, France 8%, China 7%, Netherlands 6%, United Kingdom 6%, Italy 5%, Poland 5%, Austria 5% (2019)Germany 23%, France 13%, Belgium 12%, Netherlands 6%, Italy 5% (2019)
Imports$1,804,453,000,000 (2019 est.)

$1,759,299,000,000 (2018 est.)

$1,695,300,000,000 (2017 est.)
$111.287 billion (2019 est.)

$110.275 billion (2018 est.)

$110.656 billion (2017 est.)
Imports - commoditiescars and vehicle parts, packaged medicines, crude petroleum, refined petroleum, medical cultures/vaccines (2019)cars, refined petroleum, broadcasting equipment, scrap iron, aircraft (2019)
Imports - partnersNetherlands 9%, China 8%, France 7%, Belgium 6%, Poland 6%, Italy 6%, Czechia 5%, United States 5% (2019)Belgium 27%, Germany 24%, France 11%, Netherlands 5% (2019)
Debt - external$5,671,463,000,000 (2019 est.)

$5,751,408,000,000 (2018 est.)
$4,266,792,000,000 (2019 est.)

$4,581,617,000,000 (2018 est.)
Exchange rateseuros (EUR) per US dollar -

0.82771 (2020 est.)

0.90338 (2019 est.)

0.87789 (2018 est.)

0.885 (2014 est.)

0.7634 (2013 est.)
euros (EUR) per US dollar -

0.82771 (2020 est.)

0.90338 (2019 est.)

0.87789 (2018 est.)

0.885 (2014 est.)

0.7634 (2013 est.)
Fiscal yearcalendar yearcalendar year
Public debt63.9% of GDP (2017 est.)

67.9% of GDP (2016 est.)

note: general government gross debt is defined in the Maastricht Treaty as consolidated general government gross debt at nominal value, outstanding at the end of the year in the following categories of government liabilities (as defined in ESA95): currency and deposits (AF.2), securities other than shares excluding financial derivatives (AF.3, excluding AF.34), and loans (AF.4); the general government sector comprises the sub-sectors of central government, state government, local government and social security funds; the series are presented as a percentage of GDP and in millions of euros; GDP used as a denominator is the gross domestic product at current market prices; data expressed in national currency are converted into euro using end-of-year exchange rates provided by the European Central Bank
23% of GDP (2017 est.)

20.8% of GDP (2016 est.)

note: data cover general government debt and include debt instruments issued (or owned) by government entities other than the treasury; the data include treasury debt held by foreign entities; the data include debt issued by subnational entities, as well as intragovernmental debt; intragovernmental debt consists of treasury borrowings from surpluses in the social funds, such as for retirement, medical care, and unemployment; debt instruments for the social funds are not sold at public auctions
Reserves of foreign exchange and gold$200.1 billion (31 December 2017 est.)

$173.7 billion (31 December 2015 est.)
$878 million (31 December 2017 est.)

$974 million (31 December 2016 est.)
Current Account Balance$280.238 billion (2019 est.)

$297.434 billion (2018 est.)
$3.254 billion (2019 est.)

$3.296 billion (2018 est.)
GDP (official exchange rate)$3,860,923,000,000 (2019 est.)$71.089 billion (2019 est.)
Credit ratingsFitch rating: AAA (1994)

Moody's rating: Aaa (1986)

Standard & Poors rating: AAA (1983)

Credit ratings prior to 1989 refer to West Germany.
Fitch rating: AAA (1994)

Moody's rating: Aaa (1989)

Standard & Poors rating: AAA (1994)
Ease of Doing Business Index scoresOverall score: 79.7 (2020)

Starting a Business score: 83.7 (2020)

Trading score: 91.8 (2020)

Enforcement score: 74.1 (2020)
Overall score: 69.6 (2020)

Starting a Business score: 88.8 (2020)

Trading score: 100 (2020)

Enforcement score: 73.3 (2020)
Taxes and other revenues45% (of GDP) (2017 est.)44.4% (of GDP) (2017 est.)
Budget surplus (+) or deficit (-)1.3% (of GDP) (2017 est.)1.5% (of GDP) (2017 est.)
Unemployment, youth ages 15-24total: 5.8%

male: 6.6%

female: 4.8% (2019 est.)
total: 17%

male: 17.8%

female: 16% (2019 est.)
GDP - composition, by end usehousehold consumption: 53.1% (2017 est.)

government consumption: 19.5% (2017 est.)

investment in fixed capital: 20.4% (2017 est.)

investment in inventories: -0.5% (2017 est.)

exports of goods and services: 47.3% (2017 est.)

imports of goods and services: -39.7% (2017 est.)
household consumption: 30.2% (2017 est.)

government consumption: 16.5% (2017 est.)

investment in fixed capital: 16.2% (2017 est.)

investment in inventories: 1.1% (2017 est.)

exports of goods and services: 230% (2017 est.)

imports of goods and services: -194% (2017 est.)
Gross national saving28.5% of GDP (2019 est.)

28.7% of GDP (2018 est.)

28.4% of GDP (2017 est.)
16.7% of GDP (2019 est.)

17.4% of GDP (2018 est.)

17.6% of GDP (2017 est.)

Source: CIA Factbook