Eurozone Expected To Grow At Fastest In Decade As UK Slows

Violet Tucker
November 10, 2017

The 19-country eurozone will grow by 2.2 percent in 2017, its fastest pace in a decade, the European Commission said in its autumn economic forecasts.

The commission has also raised its forecast for euro area growth over the next two years - to 2.1 per cent (up 0.3 percentage points ) in 2018 and 1.9 (up 0.2 percentage points) in 2019.

With current surveys already suggesting that heightened uncertainty is weighing on business investment in the United Kingdom, the EC report forecast investment growth will weaken in 2018, as many firms are likely to continue deferring investments in the face of uncertainty.

Real GDP is expected to advance by 1.6 pct in 2017 and 2.5 pct in both 2018 and 2019. The bloc also cut its United Kingdom 2017 economic growth forecast to 1.5% from 1.8% while keeping it steady at 1.3% for next year. A benign external environment is expected to boost net exports, which should thereby contribute to growth this year and the next.

The surplus achieved by the Labour government also features in the report which projects it to be 0.9% by the end of 2017, but is believed to decline to 0.5% in 2018, a figure that will be sustained in 2019.

The EU predicted these reforms would benefit the economy, with French growth to hit 1.6 percent this year, up from the earlier 1.4 percent. "The government deficit is moving closer to balance but risks to the fiscal outlook remain".

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The improving economic outlook reflects a broader global economic upswing that is stoking investments by European Union companies as political and economic uncertainties dim. Our policies need to remain firmly focused on making growth sustainable and inclusive.

The report says that Ireland's 2018 Budget, which includes spending measures of around 0.4 per cent of GDP that are partly covered by revenue increases of 0.3 per cent, will still see the deficit fall to 0.2 per cent of GDP in 2018. The economies of all Member States are expanding and their labour markets improving, but wages are rising only slowly.

The Commission expects a gradual rebound of investment from the second half of the year. Unemployment in the euro area is expected to average 9.1% this year, its lowest level since 2009, as the total number of people employed climbs to a record high.

"The long-lasting moderate expansion has shifted into more robust and long-lasting growth", said Pierre Moscovici, the European commissioner for economic and financial affairs, taxation and customs.

The unemployment rate in Croatia will this year be 11.1 percent, falling to 9.2 in 2018, and 7.5 percent in 2019, which should be somewhere near European Union average. Core inflation, which excludes energy and unprocessed food prices, by contrast, has been rising but remains subdued, reflecting the impact of a prolonged period of low inflation, weak wage growth as well as remaining labour market slack.

Other reports by Guamnewswatch

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