2024-01-09 12:17:45
From the point of view of the craft sector, the economic context and the rise in interest rates will remain central factors which weigh heavily on companies throughout 2024. “In the craft sector, the construction sector is particularly affected, but not only,” indicates Christian Reuter, deputy secretary general of the Federation of Artisans.
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This is why the federation proposed to the political world a whole series of measures aimed above all at guaranteeing employment. Christian Reuter, however, assumes that the new government has already “recognized the seriousness of the situation”. A series of tax measures have at least been announced while other initiatives, particularly in the area of employment, are still under discussion.
In the areas of energy transition and electric mobility, we believe it is important that the government quickly provides details on the future development of state support instruments.
Christian Reuter
deputy general secretary of the Federation of Artisans
Food crafts, for their part, benefited from a more positive Christmas period than the previous year. Nevertheless, companies in the sector feel that consumers remain cautious in their spending. Among hairdressers and beauticians, the number of bankruptcies has increased in recent months.
Necessary investments
“In the areas of energy transition and electric mobility, it is important to us that the government quickly provides details on the future development of state support instruments,” declares Christian Archyde.com, while the energy transition is shaping up to be a major challenge for the business world.
In the current situation, a countercyclical policy is necessary, according to the deputy secretary general of the Federation of Craftsmen. State investments must be maintained at a high level, procedures must be simplified and decisions must be taken to strengthen business productivity.
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According to René Winkin, director of the Federation of Luxembourg Industry (Fedil), AI will be increasingly present in the Luxembourg economy in 2024, and the energy transition will remain a major theme for companies this year.
Election deadline
Overall, however, Luxembourg industry expects a difficult context in 2024 as well. “Our international economic relations are made difficult by a gloomy investment climate, by an increasingly heavy and restrictive regulatory framework and by geopolitical tensions and instability,” explains René Winkin. The production sector certainly expects a drop, but energy prices are still “too high”.
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“The social partners must adopt a constructive and impartial attitude to face, through dialogue, the structural changes that result from them,” believes René Winkin, “especially since the public funds which until now enabled policies to intervene to ease tensions are becoming increasingly rare.
If the decline in interest rates continues, this could mean a nice rebound in 2024.
Pierre-Henry Oger
responsible for portfolio management of the investment company CapitalatWork (Foyer Group)
According to Luxembourg industry, after the European elections in June 2024, everything will depend on the capacity for action of the Commission, the Parliament and the Council to face the major challenges. “Goals, regulations and procedures will not be enough to secure Europe’s future,” says Winkin, who hopes the pro-growth overtones of the government program will be quickly implemented.
The thorny interest rates
According to Pierre-Henry Oger, head of portfolio management at the investment company CapitalatWork (Foyer Group), the health of the real estate market is of greater concern. “The cascading consequences are potentially significant for the country’s economy. Higher interest rates mean larger repayments and therefore lower savings. For example, default rates could increase, which would reduce bank profits and, ultimately, state tax revenues,” explains Pierre-Henry Oger. “If the decline in interest rates, which started in the last quarter of 2023, continues, this could mean a nice recovery in 2024.”
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The financial manager calls interest rates “the linchpin of the economy and financial markets.” The decline in recent months is therefore a positive signal and means that the measures taken by central banks to stem inflation have had the desired effect. “This is why markets are already pricing in several interest rate cuts for next year.”
2024 will be an important election year
Pierre-Henry Oger emphasizes that this year, more than three billion people will have the opportunity to go to the polls. “In addition to the European elections in June, the Belgians, the Portuguese and the Austrians will also vote,” recalls the professional. The United States, India and England are also on the list of countries where elections will be organized. “As the results are increasingly polarized, the outcome of these various elections will certainly have an impact on already tense geopolitical relations,” believes the financial manager, who specifies that geopolitics – evolution of the war in Ukraine, conflict in the Middle -East or even tensions between China and the United States – also reserves some surprises.
Reducing CO₂ emissions and moving away from fossil fuels still requires companies to make considerable investments in 2024. But it can also be a source of opportunities for companies that are well positioned to benefit, according to Pierre-Henry Oger. Those with a strong business model, good pricing power and a healthy balance sheet should be able to weather these conditions without much difficulty.
Rise in unemployment in sight
After a recession that Statec estimates at less than 1% for 2023, the Luxembourg Institute of Statistics forecasts a resumption of growth of around 2% for 2024. A further drop in inflation to around 2.6 % is planned.
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“Unemployment, on the other hand, should continue to increase,” indicates the Chamber of Commerce. Statec forecasts an increase of 0.7 points, the rate will then stand at 5.9%
The important thing for 2024 will therefore be to revive business confidence in the Luxembourg economy. According to the latest Economic Barometer from the Chamber of Commerce, this confidence fell to 64%, the lowest level since 2019.
Relaunch attractiveness
Just over half of businesses surveyed expect their business activity to stagnate over the next six months and 28% fear their business activity will contract.
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It is therefore important to revive the competitiveness and attractiveness of the country and to meet the demand for housing. Labor costs are also unlikely to further harm competitiveness. According to the latest economic barometer, 64% of business leaders named labor costs as the main challenge for 2024. Last year, three indexation brackets caused companies’ wage costs to rise.
This article was originally published on the website of Luxembourg word.
Adaptation: Laura Bannier
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