Statec has maintained its growth forecast of 3% of real GDP for Luxembourg in 2019.
At the beginning of each European semester, STATEC publishes medium-term projections for the next five years. These figures feed in particular the work of the National Economic and Financial Committee (CEFN) for the establishment of the Stability Programme (SGP)and the National Reform Programme (NRP). For 2019, Statec has reported no change in its growth forecast of 3% for real GDP, as presented in December 2018.
For 2019, the exogenous factors (especially the international situation) have not yet justified a downward revision, even if the negative risks have increased at the time of the finalisation of this projection at the end of January. For 2020, STATEC is banking on a rebound in growth, which would gradually return to its potential rate, currently estimated at just under 3%.
According to Statec, employment growth peaked in 2018 and will gradually decline in the next few years, to about 2% by 2023. The expected labour market dynamics should be enough to reduce, or at least stabilise, unemployment, over the next few years, reaching an annual average of 4.5% in 2022. This would represents a clear downward revision compared to the projections of a year ago.
Moreover, after 1.5% in 2018, inflation should rise to 1.7% this year although it will struggle to exceed 2%. According to these projections, the next index tranche would be in the fourth quarter of 2019. While the resulting wage increase tends to support service prices, the introduction of free public transport on 1 March 2020 will draw inflation down.
These forecasts constitute a conditional projection, which will come to pass (or not) depending on a certain number of assumptions, especially those related to the international environment.