Eurozone Growth Set to Accelerate as Threats Subside

Posted November 10, 2017

However, citing slowing employment growth, lower increases in real disposable incomes and moderating investment growth, the commission said Eurozone growth would moderate slightly over the forecast horizon, to 2.1 percent in 2018.

The European Commission's autumn forecast for the EU economy, released on November 9, estimated that Bulgaria's economy would continue growing strongly in 2017, raising the EC's growth target by a full percentage point compared to the spring forecast, to 3.9 per cent.

With a 3.1 percent growth this year, Spain is one of eurozone's most dynamic countries, and it should soon be able to exit the deficit procedure it has been under since 2009.

Italy remained in last place for growth in the European Commission's economic forecasts for 2017, 2018 and 2019. Previously it thought growth would be 1.7 percent.

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However, in view of Malta's openness to trade (nominal exports and imports combined to reach 270% of GDP in 2016) any volatility in Malta's main exporting sectors would have a disproportionately large impact on real GDP growth. In 2018, the debt is to fall to 130.8 percent and in 2019 to 130.0 percent, the Commission said. Private consumption will support favorable labor market trends and record high consumer confidence.

Even under a no-change scenario, Britain's economic growth would slump to 1.1% in 2019, making it the slowest growing economy after Italy's 1% expansion, the European Union said.

The government 2017 balance is expected to remain in surplus at 0.9% of GDP. "The European economy has performed significantly better than expected this year, propelled by resilient private consumption, stronger growth around the world, and falling unemployment". "While the effects of recent tax reforms pale, household consumption is expected to remain strong thanks to job growth, wage increases and favourable credit conditions". The Commissioner added that the recovery in the eurozone is low by historical standards and was "atypical given its dependence on policy support, the continuing presence of fiscal and financial fragilities stemming from the crisis and the relatively subdued domestic demand compared to past recoveries".

Domestic demand remains the primary driver of growth.

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He also noted that the current growth cycle is characterised by "less output" than previous cycles, and that "a sluggish wage growth partly reflects low productivity growth and persistent slack in [the] labour market". In the European Union, the unemployment rate is projected at 7.8% this year, 7.3% in 2018 and 7.0% in 2019.

"Based on a purely technical assumption of status quo in terms of trading relations between the EU27 and the United Kingdom, growth is still expected to remain subdued over the forecast horizon".

Once the labour supply increase becomes more moderate, wage growth is forecast to improve.

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