Economic growth is projected to continue at a pace of around 1½ per cent in 2019 and 2020. Still supportive financing conditions and business tax cuts will boost business investment, despite slowing external demand. Lower labour taxes, a more flexible labour market and improved training opportunities will help job creation, notably for low-skilled workers, supporting household consumption. Core inflation will strengthen, underpinned by the firming of the economy and a pick-up in wages.
The fiscal deficit will progressively decline, despite a temporary increase due to a tax credit reform in 2019. Consolidation efforts remain limited, though. A further reduction in non-priority spending is needed to put the public debt-to-GDP ratio, currently close to 100% (Maastricht definition), on a firmly declining path and sustainably finance ongoing tax cuts for businesses and households. In parallel, the government should continue to pursue structural reforms to generate more inclusive and sustainable growth.