Real GDP growth continued to grow robustly at +3.4% in 2016, slightly down from +3.6% in 2015. However, the GDP breakdown revealed a significant change: in 2016 growth was mostly driven by net external demand and inventories, a shift from 2015 when domestic demand was the key growth driver. Consumer spending growth decelerated to +2.1% in 2016 from +4.5% in 2015 and public spending slowed to +0.6% (+1.3% in 2015). Moreover, fixed investment dropped by -4% (after +2.7% in 2015) owing to the slowdown in EU funds absorption following the completion of the 2007-2013 programming period. However, inventories added +0.9pp to growth in 2016 (-0.2pp in 2015). Export expansion remained sound at +5.7% (unchanged from 2015) while imports slowed to +2.8% (+5.4% in 2015) thanks to low oil and energy prices, so that net exports contributed +1.9pp to growth in 2016 (+0.2pp in 2015).
Looking ahead, domestic demand, notably fixed investment, is expected to recover, which should also accelerate import growth so that net exports will be more balanced. At the same time, the inventory build-up should fade. Overall, Euler Hermes expects annual growth to ease to +2.8% or so in 2017-2018