Energy aid measures will grow economy, Statec says

Luxembourg's two energy aid packages, worth €1.7 billion, will add 0.5 percentage points this year and 1.5 next year to economic growth, the country's statistics agency said on Wednesday, as inflation has eased up across the eurozone.

Statec predicts that the Grand Duchy's economy will grow by 2% this year and 4% in 2023, the agency said in a press release.

The findings come as the EU's statistics agency Eurostat said that inflation in the eurozone has slowed to 10% in November, from 10.6% the previous month. Luxembourg's annual inflation rate stood at 7.3% last month, a drop of 1.5 percentage points compared to October, according to Eurostat.

Luxembourg has put together two aid packages that will see the state freeze the price of gas and electricity until the end of 2023, pay out tax credits for a delayed wage indexation and reduce all VAT rates by one percentage point. Together, the measures will cost the taxpayer €1.7 billion, Statec said.

The cumulative effect of the measures will bump up households' purchasing power by 1.5% in 2023, Statec said. The state aid will also help save jobs and keep unemployment in check, the statics agency said.

However, rising inflation meant that the European Central Bank had to put up interest rates, which banks have started passing on to customers.

In Luxembourg, interest rates on consumption loans for households rose to 3.1% in September, from 2.6% the year before. Fixed mortgage rates for a 10-year loan jumped to 3% in September, from 1.4% last year, according to Statec.

Rising interest rates also mean that households are getting more interests on regular saving accounts, with rates rising to 0.7% in September, from 0.1% in January, Statec said.

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