On Wednesday 15 May 2024, the European Commission published its spring 2024 economic forecast, including the latest macroeconomic forecasts for Luxembourg.

According to the Commission, following "significant" economic stagnation in 2023, "better-than-expected" growth in early 2024 and the continued decline in inflation have set the scene for a gradual expansion of activity over the forecast period.

In its spring forecast, the European Commission projected GDP growth of 1.0% in the European Union and 0.8% in the euro area in 2024. In 2025, GDP is expected to increase to 1.6% in the EU and 1.4% in the Eurozone. HICP inflation is expected to fall in the EU from 6.4% in 2023 to 2.7% in 2024, then again to 2.2% in 2025. In the euro area, it is expected to decrease from 5.4% in 2023 to 2.5% in 2024, then to 2.1% in 2025.

In Luxembourg, real GDP growth is expected to remain "weak" in 2024, at 1.4%, before increasing to 2.3% in 2025. The Commission attributed the below-average growth in 2024 mainly to "weakening net exports and investment in a context of unfavorable financing conditions and geopolitical uncertainty".

Headline inflation is expected to slow over the forecast horizon, mainly due to slowing food prices and moderating wage growth, added the Commission. Projected budget deficits are expected to increase the public debt-to-GDP ratio, although this is expected to remain low.