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Economic growth is set to moderate, to just above 1½ per cent in 2020. Accommodative monetary policy and some fiscal easing will support domestic demand, in particular private consumption, and employment. Investment will remain reasonably strong, reflecting continued favourable financing conditions and a need to expand capacity. Inflation is projected to rise gradually, as stronger wage growth and dissipating slack translate into sustained increases in core inflation.
Monetary policy should be firmly committed to remaining accommodative as long as needed to attain the inflation objective, while preparing for a gradual normalisation. The euro area fiscal stance is projected to be slightly expansionary in 2018-20. As the expansion continues, governments should improve their fiscal positions and reduce debt. Improving skills, reforming product markets, completing the single market for goods and services, and progress with the banking union, are the best guarantee for stronger, more resilient and inclusive growth.
1. Private investment is obtained as gross fixed capital formation of the total economy minus government fixed capital formation (appropriation account), deflated by the GDP deflator.
2. New business loans to non-financial corporations in the euro area (19 countries); loans other than revolving loans and overdrafts, convenience and extended credit card debt, with an initial rate fixation period of less than one year.
Source: OECD Economic Outlook 104 database; and European Central Bank, Statistical Data Warehouse.
1. Harmonised consumer price indices, net of energy and food products for core inflation.
2. Nominal wages per employee.
3. Measured in per cent of potential GDP.
Source: OECD Economic Outlook 104 database.
Economic Survey of the Euro Area (survey page)
Economic Survey of the European Union (survey page)
The Economic Consequences of Brexit: A Taxing Decision (main web page with paper)