EU Spring Forecasts 2017: Growth Outlook For The Eurozone Upgraded

European commission_Moscovici_1605

Pierre Moscovici, European Commissioner for Economic and Financial Affairs, Taxation and Customs.

Summary:

  • Eurozone to benefit from a relatively stable and upbeat global economic outlook
  • Eurozone GDP growth for 2017 and 2018 upgraded slightly higher from the Winter forecasts
  • Brexit, the US, and the European banking sector posed risks to the economic recovery in the EU
  • Inflation forecast to rise in 2017, but expected to fall a year later
  • Private consumption expected to slow while investment to remain steady
  • Eurozone unemployment to fall to 7.7% by 2018

The European Commission’s spring forecasts painted a rosy picture for the growth of the EU. Noting that the European economy was in its fifth year of recovery and it is expected to continue at a steady pace in 2017 and 2018 despite headwinds from the EU’s negotiations with the UK and the uncertain policies by U.S. President Trump.

The spring forecasts released last week on 11 May showed that the European Commission expects the growth of the gross domestic product (GDP) in the 19-nation Eurozone to rise 1.7% this year and 1.8% in 2018. The growth forecasts were slightly higher from 1.6% and 1.8% from the Winter forecasts.

The first quarter GDP report puts the Eurozone’s annualized GDP growth rate at 1.7%, slightly below 1.8% growth that was achieved the year before.

GDP growth in the 28-nation European Union as a whole is projected to remain steady at 1.9% into the next two years.

GDP forecasts euro area: EU Spring Forecast Report, May 2017

Part of the upbeat prospects comes on the back of an improvement in the global economy with China and the United States largely contributing to lifting the growth prospects in the EU. Despite the optimism, the European Commission cautioned that uncertainty in the global economic outlook still remained elevated.

The global growth excluding the EU is expected to rise 3.7% in 2017 and 3.9% in 2018 and was unchanged from the Winter forecasts. The outlook for the U.S. economy was also unchanged with the report noting that the net exports from the EU is expected to remain neutral to GDP growth over the two-year period.

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