After a subdued first half of the year, with a slowdown of investment and export of goods, real GDP accelerated in 2022-Q3 (1.1% q-o-q) on the back of resilient private consumption and a robust financial sector. Overall, annual growth for 2022 is revised up to 2%.
Higher growth projected in 2022 and a stronger increase in domestic demand (compared with the Autumn Forecast) are set to lift the GDP outlook for 2023. In particular, private consumption is expected to rise, supported by government measures to mitigate the impact of high energy prices and by sequential indexations of wages sustaining household purchasing power. Investment is set to be supported by decreasing commodity prices and improving confidence, as reflected in business sentiment indicators. Nevertheless, the tightening of financial conditions is expected to weigh on investment, particularly in the construction sector. Residential real estate construction is projected to decline due to rising interest rates that negatively affect the borrowing capacity of households and demand for mortgages. Overall, real GDP is forecast to slow down to 1.7% in 2023, before returning to 2.4% in 2024, more in line with potential growth and mainly driven by the better investment outlook.
After having peaked in 2022-Q2, headline inflation gradually decelerated in the last two quarters, driven by the slowdown in energy and services price growth, while prices of food and non-energy industrial goods continued to accelerate. For the year as a whole, HICP inflation reached 8.2%, with major contributions from energy and food prices. The projected further decrease in wholesale energy prices in combination with a package of government measures (the so-called Solidaritéitspak) to support households and businesses in mitigating the impact of elevated energy costs are expected to ease inflationary pressures in 2023. Overall, HICP inflation is set to decrease significantly to 3.1% in 2023 and further to 2.7% in 2024. By contrast, core inflation is forecast to increase due to rising food, non-energy industrial goods and services prices, and further driven by wage indexations. Following the wage indexation of February, two additional ones (also of 2.5% each) are anticipated to take place this year, in April (postponed from July 2022), and in the fourth quarter. In 2024, core inflation is expected to decrease, mainly reflecting a slowdown in food and services prices, while only one wage indexation is projected in the third quarter.