|Growth will slow somewhat in 2015, and then recover only partially in 2016, as the shift of the EU VAT regime for e-commerce from the seller to the buyer country weakens export growth and higherVAT rates bear on demand. The higher VAT will also boost consumer prices, and backward-looking wage indexation could transmit price rises to wages.
Some further fiscal consolidation is still needed, but the automatic stabilisers should be allowed to work. Aligning financial regulations with EU and international initiatives will contain risks posed by Luxembourg’s large financial sector. Structural reforms to enhance work incentives would reduce structural unemployment, while fostering competition and education would boost potential growth.
Note: All data definitions based on internationally comparable standards and may differ in specific cases from common national definitions.