GDP growth increased by +1.6% in 2016, an acceleration from +0.3% in 2015, and the highest pace of expansion in five years. Domestic demand was a driver while net exports subtracted -0.5pp from GDP growth due to poor export performance (+0.7% in volume).
Worldwide price pressures have triggered a fall in total nominal exports of goods and services to –EUR1.3bn. Private consumption growth ticked up +2% from +1.5% in 2015 due to low inflation (+0.4%), positive real wages growth, saving rate downward adjustment (-1pp since the end of 2015 to 5.8% of gross disposable income), and a lower unemployment rate (to 8.8% in 2016).
Fixed investment returned to positive territory (+1.6%) after three consecutive years of falls. Capacity utilization rates reached 81% in 2016, the highest level since 2010, but still below the long-term average.
The Construction sector registered strong growth in 2016 with investment up by +8.2%, the highest rate in a decade. Confidence in the sector reached its highest level since 2011 while permits expanded for the first time since the same year (+3% YTD in Q3 2016). Activity has picked up in both residential and non-residential sectors. Yet there is still room for improvement as nominal construction investment remains -6% below the 2008 high.
In 2017, we expect GDP growth to moderate to +1.2%. Export performance should benefit from the ongoing reforms and a lower euro (1.07 against the USD). Euler Hermes projects +3.1% growth in export volume, with gains equivalent to EUR4.6bn.