According to Eurostat, Luxembourg had the lowest annual inflation rate among EU member states in January 2023. The rates are calculated based on the harmonised indices of consumer prices (HICP), which measures prices variations in consumer goods and services.

Luxembourg‘s low inflation rate of 5.8%, which is lower than the eurozone average of 8.6% and the European Union average of 10%, was followed by Spain (5.9%), Cyprus and Malta (both 6.8%). Hungary (26.2%), Latvia (21.4%), Czechia (19.1%), and Estonia (18.6%) had the highest annual rates.

Annual inflation was lowest in Luxembourg in January 2023 according to Eurostat figures

The most recent Eurostat flash estimates for February 2023 shows that Luxembourg may likely maintain this record in the eurozone with an estimated annual inflation rate of 4.8%.

Food, alcohol, and tobacco are expected to contribute the most to the eurozone annual inflation rate in February 2023, at 15%, up from 14.1% in January. This is followed by energy (13.7% vs. 18.9% in January), non-energy industrial goods (6.8% vs. 6.7% in January), and services (4.8% vs. 4.4% in January).

Eurostat Flash estimates February 2023

Nevertheless, Luxembourg’s annual inflation rate has steadily declined from 8.8% in September 2022, although it remains higher than the pre-covid times. This downward trend in annual inflation can also be seen in the eurozone, where annual inflation fell from 10.1% in November 2022 to 8.5% (estimate for February 2023). Similarly, the annual inflation rate in the EU has fallen from 11.1% in November 2022 or 10.4% in December.

Eurostat annual inflation rates for Luxembourg and the euro area

According to the European Central Bank‘s Survey of Professional Forecasters, HICP inflation is expected to fall from 5.7% in 2023 to 2.7% in 2024 and 2.1% in 2025.  The European Commission’s HICP inflation forecast for Luxembourg predicts a decline from 3.1% this year to 2.7% in 2024.

The most recent figures released by the government statistics office STATEC also shows a decrease in annual inflation rates for February 2023 (4.3%) compared to January 2023 (4.8%).

Luxembourg is AAA rated by several credit rating agencies due to its strong economic resilience and fiscal stability. Despite a challenging economic climate in several contexts, Luxembourg has managed to keep inflation under control, and the country’s credit rating has been maintained with a stable outlook.

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