OECD main findings Luxembourg 2015 diversifying growth

1. http://www.oecd.org/eco/surveys/economic-survey-luxembourg.htm
OECD
OECD Economics
2015 OECD ECONOMIC
SURVEY OF LUXEMBOURG
Diversifying growth
Luxembourg, Friday 27th March 2015

2. Incomes and well-being belong to the highest
in the OECD
Difference in GDP per capita to the 10 OECD economies with the highest GDP
2
Note: Simple average of the 10 OECD countries with the highest GDP
per capita (in constant 2005 PPPs) in 2013.
Source: OECD.
Well-Being outcomes: Better Life Index, 2014
Indicator range from 0 to 10 (best)
Source: OECD (2014), OECD Better Life Index,
www.oecdbetterlifeindex.org.
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
1990 91 92 93 94 95 96 97 98 99 2000 01 02 03 04 05 06 07 08 09 10 11 12 13
USD, constant 2005 PPP
Real GDP per capita, Luxembourg
Real GDP per capita, 10 highest economies
0
1
2
3
4
5
6
7
8
9
10
Income and wealth
Jobs and earnings
Housing
Work and life balance
Health status
Education and skillsSocial connections
Civic engagement and
governance
Environmental quality
Personal security
Subjective well-being
LUX OECD

3. Dependence on the financial sector is high
3
Share of financial and insurance activities in total
value added, 2013
Source: Eurostat.
%
0
5
10
15
20
25
30
Germany United Kingdom Switzerland Luxembourg

4. Structural unemployment has increased
4
Productivity
Source: OECD Economic Outlook 96.
Unemployment
-1
0
1
2
3
4
5
6
7
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Y-o-y % changes
Potential GDP per capita growth
Trend labour productivity growth
0
1
2
3
4
5
6
7
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
%
Structural unemployment rate
Unemployment rate

5. Main Findings
• Luxembourg is one of the most prosperous countries in the OECD and an
attractive business location.
• The financial sector is an important source of high incomes.
• The economy depends to a large extent on the financial sector, creating
potential vulnerabilities.
• Economic diversification could raise productivity growth and reduce
vulnerabilities.
5

6. Key Recommendations
• Continue efforts to secure comprehensive risk assessment in financial
markets and effective cross-border resolution of banks.
• Improve the evaluation of the effectiveness of public R&D spending and
cluster policies to support economic diversification.
• Reduce disincentives for labour force participation of women.
• Strengthen fiscal planning via a spending review mechanism linked to the
medium-term budgeting framework.
6

7. Strengthening the performance and
resilience of the financial sector

8. Banking is international
8
Banks in Luxembourg by origin (end 2014)
Number, percentage in parenthesis
Source: Commission de Surveillance du Secteur Financier, Luxembourg.
Luxembourg 5 (3.3)
Belgium 7 (4.7)
Germany 33 (22.2)
France 15 (10.1)
United Kingdom 9 (6.0)Switzerland 12 (8.1)
Other EU 31 (20.9)
United States 6 (4.0)
China 6 (4.0)
Brasil 5 (3.3)
Japan 5 (3.3)
Other World 14 (9.4)

9. Bank credit was resilient during the crisis
9
Bank credit and non-performing loans
Source: STATEC; BCL.
0
5
10
15
20
25
30
35
40
45
2006 07 08 09 10 11 12 13
EUR billion
Credit to non-financial corporations in Luxembourg
Credit to households in Luxembourg
0
1
2
3
4
5
6
7
8
2006 07 08 09 10 11 12 13
Luxembourg Euro Area
% of total gross loans
A. Bank credit to the private sector continued
to grow during the crisis
B. Non-performing loans of credit
institutions stayed low

10. Non-bank business is on the rise
10
Assets of banks and investment funds
1. Undertakings for Collective Investment (UCI): net assets.
Source: CSSF
500
1000
1500
2000
2500
3000
Jan-01
Jul-01
Jan-02
Jul-02
Jan-03
Jul-03
Jan-04
Jul-04
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
EUR billion
Credit institutes: Total assets Investment Fund: Assets under management¹

11. Banks are comparatively well capitalised
11
Banks’ capital ratios
Note: Based on quarterly data as of December 2013; where these are not available the most recent available data are taken, extending back to
December 2012.
Source: IMF Financial Soundness Indicators report; http://fsi.imf.org/.
0
5
10
15
20
25
Spain Italy United
States
Netherlands France United
Kingdom
Switzerland Austria Belgium Germany Ireland Luxembourg
% A. Regulatory capital to risk-weighted assets
0
5
10
15
20
25
Italy Spain Netherlands United
States
France Austria United
Kingdom
Germany Belgium Switzerland Ireland Luxembourg
% B. Regulatory tier 1 capital to risk-weighted assets

12. Ensure a healthy financial sector
• Sound financial market regulation has supported growth of the financial
sector.
• Continue to monitor financial market risk while using a comprehensive
approach to risk assessment that accounts for financial linkages between
banks and other financial intermediaries.
• Continue efforts to develop resolution plans and to undertake resolvability
assessments so that important banks could be resolved effectively across
borders.
• Continue to actively participate in international negotiations on co-
ordinated action to combat tax base erosion and profit shifting of
multinational enterprises. Change domestic laws as necessary.
12

13. Raising productivity and fostering the
diversification of the economy

14. Entrepreneurship

15. Raise investment in knowledge-based capital
15
Investment in knowledge-based capital, 2010
In percent of value-added of the business sector
Source: OECD Science, Technology and Industry Scoreboard 2013.
0
5
10
15
20
25
30
35
Spain
Italy
Korea(2008)
Portugal
Australia
Luxembourg
Ireland
CzechRepublic
Austria
Japan(2008)
Germany
Slovenia
Netherlands
Finland
Canada(2008)
UnitedKingdom
Belgium
Denmark
France
Sweden
UnitedStates
%
Software and databases
R&D and other intellectual property products
Brand equity, firm-specific human capital, organisational capital

16. Raise R&D spending
16
R-D expenditure
Gross domestic expenditure in percent of GDP
Source: OECD(2014), "Main Science and Technology Indicators“.
0
0.5
1
1.5
2
2.5
2003 04 05 06 07 08 09 10 11 12
%
Luxembourg OECD
0
0.5
1
1.5
2
2.5
2003 04 05 06 07 08 09 10 11 12
%
OECD Luxembourg
A. Total B. Business Entreprise

17. Strengthen cooperation between enterprises
and institutes
17
SME collaboration on innovation
In percent of product or process innovative firms, 2008-10
2011 for Australia, 2006-08 for Ireland, 2009-10 for New Zealand and 2009-11 for Switzerland. SME: Small and medium-
sized enterprises. The OECD aggregate covers 30 countries in panel A and 28 in panel B.
Source: OECD (2013), OECD Science, Technology and Industry Scoreboard 2013.
0
10
20
30
40
50
60
70
Australia
Italy
NewZealand
Portugal
Estonia
Ireland
Netherlands
Switzerland
Poland
Spain
Denmark
Sweden
Luxembourg
France
Germany
OECD
Norway
UnitedKingdom
Belgium
Hungary
Austria
Finland
A. Collaboration with higher education or public research
institutions
0
5
10
15
20
25
30
35
Italy
Spain
Australia
Germany
Portugal
NewZealand
Poland
Netherlands
Switzerland
Ireland
France
Hungary
OECD
Norway
Belgium
Sweden
Finland
Luxembourg
Austria
Estonia
UnitedKingdom
B. International collaboration

18. Enhance the potential of innovative industries
• Better evaluate the effectiveness of public R&D spending and cluster
policies.
• Strengthen the cooperation between enterprises, University of
Luxembourg and research institutes in Luxembourg and abroad.
18

19. Education and labour force
participation

20. Improve high school completion
20
Successful completion of upper secondary programmes, 2012
Note: N: theoretical duration of the programmes.
Countries are ranked in descending order of the successful completion of upper secondary programmes.
Source: OECD (2014), Education at a Glance. See Annex 3 for notes (www.oecd.org/edu/eag.htm).
0
10
20
30
40
50
60
70
80
90
100
UnitedStates
Estonia
Sweden
OECD
Belgium
Finland
NewZealand
UnitedKingdom
Italy
Chile
Netherlands
Spain
Denmark
France
Norway
Iceland
Luxembourg
%
Completion after N years Completion after N+2 years

21. Raise female labour force participation
21
Female labour market participation rate, 2013
1. The labour force participation rate is defined as the ratio of the labour force to the working age population, expressed in percentages.
Source: OECD Labour Force Statistics.
0
10
20
30
40
50
60
70
80
90
Turkey
Mexico
Italy
Chile
Korea
Greece
Hungary
Poland
Belgium
SlovakRepublic
OECD
Luxembourg
Ireland
Japan
CzechRepublic
Slovenia
France
UnitedStates
Israel
EuroArea
Spain
Portugal
Australia
Austria
Estonia
UnitedKingdom
Germany
NewZealand
Finland
Canada
Netherlands
Denmark
Norway
Switzerland
Sweden
Iceland
%
0
10
20
30
40
50
60
70
SlovakRepublic
Hungary
CzechRepublic
Slovenia
Estonia
Poland
Portugal
Greece
Korea
Finland
UnitedStates
Sweden
Israel
France
Spain
Chile
Turkey
Iceland
Denmark
OECD
Canada
Luxembourg
Mexico
Norway
Belgium
EuroArea
Italy
Austria
NewZealand
Japan
Ireland
Germany
Australia
UnitedKingdom
Switzerland
Netherlands
%
A. Female labour force participation rate¹
B. Share of female part-time employment in total female employment

22. Nourish a high-quality labour force
• In secondary education, reduce grade repetition, provide more school
autonomy and better monitor education quality.
• Increase enrolment in early childhood education with emphasis on low-
income and foreign-language families.
• Reduce disincentives for labour force participation of women by charging
health care contributions for each spouse individually and introducing
separate income tax assessment of spouses.
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23. More Information…
http://www.oecd.org/eco/surveys/economic-survey-luxembourg.htm
OECD
OECD Economics
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