Although global uncertainties continue to weigh on the outlook for foreign demand and could thereby dampen export growth, robust domestic demand should partly counteract the negative impact on growth stemming from the external environment. Solid domestic demand is anticipated to remain the driving force behind real GDP growth. Consumption expenditure is expected to grow strongly this year and to remain buoyant thereafter.
Most notably, consumption is boosted by improving labour market conditions, with unemployment falling steadily despite a rise in participation. These improvements support the consumption expenditure of both existing employees, who are reassured of their earnings prospects, as well as new employees. Moreover, euro area consumers are still benefitting from higher real disposable incomes, reflecting past declines in oil prices.