The European commission has presented its autumn forecast report, which sets out the economic situation and economic developments in the EU and in individual countries, including Luxembourg.
Published on Thursday 9 November, it paints an optimistic picture of the euro area economy, which is on track to grow at its fastest pace in a decade this year, with real GDP growth forecast at 2.2%. This is substantially higher than expected in spring (1.7%). The EU economy as a whole is also set to beat expectations with robust growth of 2.3% this year (up from 1.9% in spring).
The report states that growth was pushed by “resilient private consumption, increasing support from a global upswing, loose financing conditions and healthy improvements in the labour market. Investment, which had been lagging, also shows signs of a broad-based pick-up.”
Consumer and business sentiments are also high.
While recovery has taken place for 18 uninterrupted quarters, it remains incomplete and atypical, because of its dependence on policy support, the continuing presence of fiscal and financial fragilities stemming from the crisis, and the subdued strength of domestic demand compared to previous recoveries. Wage dynamics are still constrained and inflation dampened because of slow productivity growth and a slack in the labour market.
After climbing to 2.2% this year, euro area GDP growth is forecast to grow by 2.1% in 2018 and 1.9% in 2019.
In 2017, private investment will be mainly driven by the satellite and aircraft industry, while growth of construction investment is forecast to remain robust throughout the forecast horizon, the report states.
In 2019, consumption growth is projected to ease further, with income gains fading away and inflation progressively taking effect. The external sector, which is dominated by financial services exports, is expected to remain robust, even if receding, in line with financial markets prospects, according to the forecast.