The European Commission reckoned that Luxembourg’s economy will expand at a slightly slower rate this year than in 2018, but inflation should slow too.
According to commission figures, Luxembourg GDP grew 2.6% last year. In its “Summer 2019 Economic Forecast”, released on 10 July, the commission predicted Luxembourg GDP growth of 2.4% for 2019, “before perking up again slightly to 2.6% in 2020.”
Due to uncertainty in the global financial markets, Luxembourg’s “financial sector is expected to make a relatively moderate contribution to growth.”
Instead, consumers will be the main engine of expansion. The European Commission forecast stated:
“Private consumption growth, the main driver of domestic demand, should continue to benefit from strong labour market conditions. In addition, budgetary measures and indexed increases in wages and pensions last year and this year should also support household purchasing power. However, employment support is expected to weaken in line with slowing job creation, especially among the resident population.”
Across the EU28, GDP growth was 2% in 2018 and was forecast to be 1.4% this year, and 1.6% (with or without the UK) in 2020.
The commission said consumer prices in Luxembourg rose 2% in 2018 and forecast the rate would be 1.7% this year and 1.6% in 2020. Falling oil prices and the introduction of free public transport in 2020 are expected to dampen inflation.