Thanks to a strong rebound in the second quarter of this year, economic growth is expected to reach +1.0% in 2023 and increase to 1.2% in 2024. After having slowed down significantly in the second half of 2022 and in the first quarter of 2023, on the back of supply bottlenecks and higher energy and commodity prices, GDP growth accelerated to 0.5% in the second quarter of the year. This was significantly more than previously expected (0.1%). The rebound was driven by net exports, while domestic demand remained sluggish. GDP is forecast to grow moderately over the rest of the forecast horizon, as domestic demand starts to recover.
While households’ purchasing power has been preserved thanks to government measures, dynamic wages and a very favourable labour market, private consumption remains weak as households maintained an exceptionally high saving rate. Over the next quarters, consumption is expected to pick up as inflationary pressures progressively dissipate, and as the households’ saving rate returns gradually to its historical average. Investment from both households and corporations is projected to recover progressively. Over the forecast horizon, net exports are set to have a limited contribution to growth. Exports growth, which traditionally relies on a few specialised sectors such as aeronautics and other transport equipment, is expected to be offset by rising imports mirroring the expansion of household consumption.
nflation increased to 5.9% in 2022, driven by energy and commodity prices, but remained the lowest in the EU thanks to government support measures. In 2023-Q1, higher regulated electricity and gas prices and the end of the fuel rebate pushed energy inflation up. Food products inflation soared as well, as the increase in energy and commodity prices eventually passed through to consumer prices. Similarly, the delayed pass through of energy prices to other products led to a significant increase in the underlying inflation. Overall, this resulted in headline inflation peaking in 2023-Q1, followed by a decline in 2023-Q2. Headline inflation is projected to decrease further throughout the forecast horizon but only gradually, as wage increases feed into core inflation while lower energy prices translate into non-energy industrial goods with a delay. Thus, headline inflation is expected to stand at 5.6% in 2023 as a whole, before slowing down to 2.7% in 2024, a slight upward revision from the Spring Forecast (5.5% in 2023 and 2.5% in 2024).