EU Spring Forecasts 2017: Growth Outlook For The Eurozone Upgraded

The European commission flagged risks from Brexit, President Trump’s policies on world trade and the weakness in the European banking sector as risks that could impact the recovery.

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EU Economy Commissioner Pierre Moscovici said that “the euro area recovery in jobs and investment remains uneven” despite some of the risks dissipating.

On inflation, the European Commission said that despite the surge in headline consumer prices in the recent months, inflation is not expected to reach the ECB’s 2% target anytime soon.

Inflation breakdown and forecasts: EU Spring Forecast Report, May 2017

The central bank was seen vigorously defending its easy monetary policy amid recent signs of an increase in consumer prices. This has led to lawmakers from EU member nations such as Germany and Netherlands to call for the ECB to tighten monetary policy.

ECB officials have remained cautious so far as the current QE program at €60 billion a month in bond purchases is expected to continue through the end of December 2017.

The European Commission expects inflation to average 1.6% in 2017 and rise just 1.3% in 2018 as the effects of higher oil prices fade. Private consumption is also expected to take a backseat after rising at the fastest pace in over 10-years in 2016.

The European commission expects employment rate to fall by 2018 on rising domestic demand and structural reforms alongside government policies that support job creation. While the unemployment rate is expected at 9.4% in 2017, it is expected to fall to a 9-year low by 2018 at 8.9%.

The unemployment rate in the whole of EU is expected to see a similar trajectory with the forecasts showing the EU unemployment rate at 8% in 2017 and 7.7% in 2018.

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