EU Raises Eurozone Growth Forecast

The Brandenburg Gate reflected by a puddle on Pariser Platz Square in Berlin Germany Tuesday Nov. 7 2017

The Brandenburg Gate reflected by a puddle on Pariser Platz Square in Berlin Germany Tuesday Nov. 7 2017

In its forecasts, the European Commission said growth in 2018 would edge lower to a still strong 2.1 percent, followed by 1.9 percent in 2019.

In its previous forecasts in May, the Commission counted on only a 1.9 percent growth this year and next year.

Despite this growth, the Commission states in its report that the Croatian GDP would return to the level before the crisis in two years.

Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs, said: "After five years of moderate recovery, European growth has now accelerated". "It is without a doubt that we are entering a new phase in the European economic recovery".

Private consumption is expected to recover after a weak performance in the first half of 2017, mainly because more residents were in employment. Wage dynamics are still constrained and inflation dampened because of slow productivity growth and a slack in the labour market. "This is substantially higher than expected in spring (1.7%)", the Commission noted.

The Commission also raised its eurozone growth forecast for next year to 2.1 percent from 1.8 percent and said growth in 2019 is expected to be 1.9 percent. Centrist, pro-European governments kept power in Germany, France and the Netherlands in the wake of a busy election cycle this year, while the European Central Bank opted to maintain its accommodative monetary policies. Average annual inflation is projected to accelerate to 1.5% in 2018 and 1.6% in 2019.The positive developments in the labour market are expected to remain.

The UK's growth will lag behind virtually every other major European nation for the next handful of years, as the booming eurozone overtakes Britain's Brexit stricken economy, according to estimates from the European Commission.

It said that "recent cost-competitiveness gains could help exporters to better absorb the euro's appreciation than in the past", and that "higher corporate investment could help boost potential growth, leading to self-fulfilling higher growth expectations". But Moscovici insisted that the country is "on the right track" even if it has to "continue efforts to strengthen its economic structures and make the necessary adjustments".

The commission stressed that its analysis of Britain's prospects was based on a "purely technical assumption of status quo" in terms of the UK's relations with the European Union, and did not take into account any possible outcome from negotiations on a future trade deal. Private consumption is forecast to slow down in 2018 and 2019.Higher increase in imports, driven by strong domestic demand, will lead to a reduction in the current account surplus to 3% of GDP in 2017.

Greece is another country where the coming months will be crucial, with the end of the current bailout programme next summer.

Macron is now pushing through significant labor reforms in France and hopes around those reforms, combined with his repeated calls for enhanced European economic cooperation and consolidation, have helped push growth expectations for France for 2017 up to 1.6 percent from the earlier 1.4 percent.

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