Statec, Luxembourg’s statistics agency, has published its first report of the year entitled “A more balanced growth” on the economic situation.
On 30 May, Statec put the positive outlook down to the economic recovery of the Eurozone and the world in general.
It estimated that growth will be 2% for 2017 and 2018 in the Eurozone. Demand was mostly carried by household spending, but should benefit from more private investment in 2017 and even more in 2018, which would make it a more self-sustained growth, the statistics bureau reported.
5% growth in 2017 and 2018
Growth was over 4% in 2016 and there was a better balance between internal and external demand. The financial sector should find a more favourable environment through the recovery of the stock markets and the dynamics between credits to households and companies.
Production indicators for industry and construction and turnover (in non-financial services) showed disappointing results for the first months of 2017. However, consumer and business confidence are at record highs, which contribute to a projected growth to private consumption and investment.
Statec forecast growth levels of almost 5% for 2017 and 2018. The economy is travelling towards the peak of the cycle, with a positive output gap and a growing labour market, with no tensions on salaries and prices.
Consumer prices and salaries on the rise
Inflation in the Eurozone has gone up and reached levels not seen since 2013, due mostly to rising petrol and food prices. The report projected inflation levels of 1.8% for 2017 and 1.7% in 2018.
The average salary is going up significantly in 2017, mainly because of the indexation at the beginning of the year, but also because of the pay rise agreement in the civil service and to a lesser extent of the raise of the minimum wage.
National employment grew by 3.3% in 2016, affecting all sectors and job offers are at historically high levels. Unemployment is down to 6% in April 2017. These developments, along with high economic growth, lead Statec to predictions of continued high levels of job creations and a fall in unemployment this year and in 2018.
“Respecting all European criteria”: public finances
Statec found that Luxembourg’s public finances are in very good shape and have produced a surplus for the past 6 years. However, that surplus is going to turn into a deficit of 0.5% of GDP in 2017.