LUX Luxembourg profile

Luxembourg operates as a constitutional monarchy with a parliamentary system. The government typically forms through coalitions and policy making emphasizes consensus among major parties. Decision making can be stable but reform efforts move cautiously due to coalition dynamics and a commitment to EU obligations. Public administration is capable but bureaucracy can feel opaque and reform processes can be slow. Policy is influenced by cross border considerations for workers and by the need to maintain fiscal stability, while lobbying and interest groups play a visible role in shaping outcomes.

Colonial history No colonial history
Government type Constitutional monarchy
Legal system Civil law system
Political stability Stable

The economy centers on financial services and related activities, supported by a favorable business climate and a skilled workforce. The sector mix also includes logistics and professional services that benefit from strategic location. Diversification remains a concern, as heavy dependence on finance makes the economy sensitive to global regulatory shifts and mood in international markets. Housing affordability, wage dynamics, and social cohesion are ongoing policy concerns, and there is scrutiny of tax regimes and competition among large firms.

Currency name Euro
Economic system Mixed economy
Informal economy presence Limited
Key industries Finance, Steel, Information technology
Trade orientation Strongly export-oriented

Luxembourg is a small, densely developed territory with limited natural resources, making efficient land use essential. Urban expansion places pressure on green spaces and biodiversity, while climate resilience and energy planning require careful management in a compact footprint. Environmental policy benefits from cross border cooperation with neighboring countries, particularly on pollution, water management, and nature protection. Energy supply and transitions rely on imports and regional arrangements, underscoring strategic considerations for resilience.

Bordering countries Belgium, France, Germany
Climate type Oceanic climate
Continent Europe
Environmental Issues Air pollution, habitat loss
Landlocked Yes
Natural Hazards Flooding
Natural resources Limestone, steel, industrial minerals
Terrain type Gently rolling hills, plateaus, and valleys

The population includes a substantial migrant and cross border workforce, contributing to cultural and linguistic diversity but presenting integration challenges. Social policy seeks to balance education, housing, healthcare, and social welfare, yet disparities in access and opportunity persist for different groups. The education system performs well in international comparisons but faces ongoing needs related to language diversity and inclusion. An aging demographic and labor participation levels shape debates about sustainability of welfare provisions and social services.

Cultural heritage Rich history of art and architecture, UNESCO World Heritage Sites
Driving side Right
Education system type Public and private education system
Ethnic composition Predominantly Luxembourgish, French, Belgian, and German residents
Family structure Nuclear family predominates
Healthcare model Universal healthcare system
Major religions Roman Catholicism, Protestantism, Islam
Official languages Luxembourgish, French, German

Transport links connect Luxembourg with neighboring states through a modern road and rail network that underpins commuting and freight. The country markets itself as a digital and administrative hub with strong e government services and reliable telecom infrastructure. Data handling, cybersecurity, and regulatory environments attract international investment in technology and finance services. Innovation policy targets research and development, advanced manufacturing, and fintech, though talent availability and housing constraints can constrain growth.

Internet censorship level Low
Tech innovation level High
Transport system type Well-developed public transport network

Development indicators

Indicator Year Value Rank 5Y Rank Change
Military expenditure (current US$) 2023 662,492,816 88 -14
Political Stability and Absence of Violence/Terrorism 2023 1.05 21 +13
Regulatory Quality 2023 1.93 3 -9
Rule of Law 2023 1.75 6 -3
Unemployment, total (% of total labor force) 2023 5.18 48 -12
Birth rate, crude (per 1,000 people) 2023 9.5 163 -5
Death rate, crude (per 1,000 people) 2023 6.6 119 +18
Exports of goods and services (% of GDP) 2024 216 1 0
GDP per capita (current US$) 2024 137,517 2 -2
GDP per capita, PPP (current international US$) 2024 150,772 1 -1
High-technology exports (current US$) 2023 801,169,826 58 +7
Hospital beds (per 1,000 people) 2021 4.15 15 -11
Imports of goods and services (% of GDP) 2024 183 1 -1
Inflation, consumer prices (annual %) 2024 2.05 112 +5
Life expectancy at birth, total (years) 2023 83.4 14 -9
Mortality rate, under-5 (per 1,000 live births) 2023 2.3 156 -2
Net migration 2024 5,677 53 +2
Patent applications, residents 2021 112 60 -1
Population, total 2024 677,717 167 -1
Poverty headcount ratio at national poverty lines (% of population) 2021 17.3 36
Prevalence of undernourishment (% of population) 2022 2.5 91 +1
Renewable energy consumption (% of total final energy consumption) 2021 20.5 95 -15
Research and development expenditure (% of GDP) 2022 0.977 33 +4
Foreign direct investment, net inflows (% of GDP) 2023 -71.7 188 -4
Current account balance (% of GDP) 2024 13.8 7 -7
Level of water stress: freshwater withdrawal as a proportion of available freshwater resources 2021 3.96 133 -2
Total greenhouse gas emissions excluding LULUCF per capita (t CO2e/capita) 2023 11.8 24 +6
Current health expenditure (% of GDP) 2023 5.78 19 -90
Domestic general government health expenditure per capita, PPP (current international US$) 2023 7,125 1 -2
Suicide mortality rate (per 100,000 population) 2021 8.22 76 +13
Individuals using the Internet (% of population) 2024 98.8 2 -3
Control of Corruption 2023 1.93 8 +1
Government Effectiveness 2023 1.91 5 -4
Logistics performance index: Quality of trade and transport-related infrastructure (1=low to 5=high) 2022 3.6 10

Compare Luxembourg to other countries

Demography and Health

Luxembourg remains a small but highly developed demography, with a population of 677,717 in 2024 (ranking 167th by size). The country exhibits a mature, high‑income profile: life expectancy at birth is 83.4 years (2023, ranking 14th), and mortality for children under five is low at 2.3 per 1,000 live births (2023, ranking 156). The birth rate sits at 9.5 per 1,000 people (2023, ranking 163) while the death rate is 6.6 per 1,000 people (2023, ranking 119), signaling a stable age structure with longevity effects. Net migration in 2024 reached 5,677 people (ranking 53), reflecting Luxembourg’s role as a magnet for cross-border workers and international talent. Unemployment stands at 5.18% in 2023 (ranking 48), indicating a tight labor market in a high-value economy. The national poverty headcount is 17.3% (2021, ranking 36), and undernourishment is very low at 2.5% (2022, ranking 91), underscoring broad material well‑being. Health financing is robust: current health expenditure is 5.78% of GDP (2023, ranking 19), while domestic general government health expenditure per capita, PPP, is 7,125 international dollars (2023, ranking 1). Luxembourg maintains 4.15 hospital beds per 1,000 people (2021, ranking 15), reflecting ample health capacity for its residents.

Economy

Luxembourg ranks among the world’s wealthiest economies by standard of living. GDP per capita (current US$) is 137,517 in 2024, ranking 2nd globally, while GDP per capita, PPP, is 150,772 (2024, ranking 1). The economy is exceptionally open: exports of goods and services amount to 216.0% of GDP (2024, ranking 1) and imports to 183.0% of GDP (2024, ranking 1), signaling a highly traded and services‑driven economy with substantial re‑exports. The current account balance is a sizable surplus at 13.8% of GDP in 2024 (ranking 7), pointing to a strong external position and capacity to fund investment and public services. Foreign direct investment net inflows as a share of GDP are negative at −71.7% (2023, ranking 188), reflecting Luxembourg’s role as a global financial and corporate hub with substantial outward investment and reinvested earnings rather than a simple inward FDI model. Inflation is low and stable at 2.05% in 2024 (ranking 112). High‑value services, finance, and logistics underpin growth, while research and development expenditure stands at 0.977% of GDP (2022, ranking 33), indicating ongoing but modest investment in innovation relative to GDP. High‑tech exports total about 801 million USD (2023, ranking 58), illustrating a service‑ and knowledge‑intensive export profile rather than mass manufacturing. Inflation control, a favorable governance framework, and cross‑border economic activity together sustain Luxembourg’s wealth.

Trade and Investment

Luxembourg’s trade footprint is extraordinary for its size. Exports of goods and services reach 216.0% of GDP in 2024 (ranking 1), while imports amount to 183.0% of GDP (ranking 1), highlighting a deeply integrated, transaction‑rich economy with substantial re‑exports and logistics activity. The current account balance stands at 13.8% of GDP in 2024 (ranking 7), signaling a strong external position and capacity to finance investment and welfare programs. The data also show a negative net inflow of foreign direct investment at −71.7% of GDP in 2023 (ranking 188), which is consistent with Luxembourg’s role as a global financial center and corporate service hub where outward flows and internal corporate financing are significant. This combination—high trade openness, persistent current account strength, and outward investment flows—reflects a model built on international finance, multinational corporate activity, and sophisticated services rather than a traditional domestic production economy. The result is a persistent ability to mobilize capital for innovation, infrastructure, and social spending while maintaining elite‑level living standards.

Governance and Institutions

Luxembourg exhibits exceptionally strong governance indicators. Regulatory quality is 1.93 (2023, ranking 3), Rule of Law 1.75 (ranking 6), and Government Effectiveness 1.91 (ranking 5), with Control of Corruption at 1.93 (ranking 8). Political Stability and Absence of Violence/Terrorism stands at 1.05 (ranking 21). Taken together, these scores place Luxembourg among the top tier of global governance: predictable regulation, credible policy execution, and relatively low corruption underpin a business‑friendly, stable environment. Such institutions support long‑term investments, financial integrity, and trust in public services—crucial for a small, highly integrated economy dependent on foreign capital and cross‑border trade. The governance landscape complements the country’s high internet penetration and sophisticated service sectors, reinforcing a conducive climate for innovation, risk management, and social policy coherence in a densely interconnected European context.

Infrastructure and Technology

Luxembourg boasts advanced infrastructure and high digital readiness. Internet adoption is near universal, with 98.8% of the population using the Internet in 2024 (ranking 2). The Logistics Performance Index (quality of trade and transport infrastructure) scores 3.6 out of 5 in 2022 (ranking 10), indicating highly capable logistics and border‑crossing efficiency that supports global services and finance activities. Public health expenditure is strong, with domestic general government health expenditure per capita, PPP, at 7,125 international dollars (2023, ranking 1) and current health expenditure at 5.78% of GDP (2023, ranking 19), reflecting generous public coverage and service levels. Luxembourg has 4.15 hospital beds per 1,000 people (2021, ranking 15), signifying adequate health capacity for residents and cross‑border workers alike. Innovation activity is present but modest in scale: resident patent applications total 112 (2021, ranking 60), and high‑technology exports amount to about 801 million USD (2023, ranking 58). R&D expenditure stands at 0.977% of GDP (2022, ranking 33), leaving room for growth in business‑led research and development to deepen a knowledge‑based economy. The combination of high internet usage, robust logistics, substantial health spending, and selective innovation activity underpins a modern, service‑led economy with strong global connectivity.

Environment and Sustainability

Luxembourg’s environmental indicators reflect a wealthy, densely populated small state balancing prosperity with sustainability. Renewable energy accounts for 20.5% of total final energy consumption in 2021 (ranking 95), indicating a transition toward cleaner energy but with ample room for expansion. Total greenhouse gas emissions per capita excluding LULUCF are 11.8 tonnes of CO2 equivalent (2023, ranking 24), highlighting a relatively high carbon footprint tied to high consumption levels and energy intensity in a country with intensive services, finance, and transport logistics. The level of water stress, measured as freshwater withdrawal relative to available resources, is 3.96 (2021, ranking 133), signaling moderate stress within a small resource base. Luxembourg benefits from strong governance and technical capacity to address environmental challenges, with potential for accelerating renewable deployment, energy efficiency, and cross‑border cooperation on climate policy given its strategic European position. Overall, Luxembourg shows a sustainable trajectory tempered by the realities of a high‑income, energy‑intensive service economy that can further leverage innovation and policy coherence to reduce environmental impact.